kaisun holdings limited

ANNUAL REPORT2020

* For identification purpose only

(Incorporated in the Cayman Islands with limited liability)

Stock Code : 8203

KAISUN HOLDINGS LIMITED凱順控股有限公司*

COVID-19

年報2020

* 僅供識別

新型冠狀病毒

（於開曼群島註冊成立之有限公司）股份代號 : 8203

KAISUN HOLDINGS LIMITED凱順控股有限公司*

ANNUAL REPORT 2020 年報

KAISUN HOLDINGS LIMITED 凱順控股有限公司

CHARACTERISTICS OF THE GEM OF THE STOCK EXCHANGE OF HONG KONG

LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to

which a high investment risk may be attached than other companies listed on the

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Given the emerging nature of companies listed on GEM, there is a risk that

securities traded on GEM may be more susceptible to high market volatility than

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Limited take no responsibility for the contents of this report, make no representation as

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however arising from or in reliance upon the whole or any part of the contents of this

report.

This report, for which the directors (the “Directors”) of Kaisun Holdings Limited (the

“Company”) collectively and individually accept full responsibility, includes particulars

given in compliance with the Rules Governing the Listing of Securities on the GEM for

the purpose of giving information with regard to the Company. The Directors, having

made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1)

the information contained in this report is accurate and complete in all material respects

and not misleading; (2) there are no other matters the omission of which would make

any statement in this report misleading; and (3) all opinions expressed in this report have

been arrived at after due and careful consideration and are founded on bases and

assumptions that are fair and reasonable.

The English text of this annual report shall prevail over the Chinese text in case of inconsistencies.

Contents

Corporate Information 3

Financial Summary 4

Chairman’s Statement 5

Management Discussion and Analysis 6

Biography of Directors and Senior Management 22

Directors’ Report 25

Corporate Governance Report 36

Independent Auditor’s Report 64

Consolidated Statement of Profit or loss 74

Consolidated Statement of Profit or Loss

and Other Comprehensive Income 76

Consolidated Statement of Financial Position 77

Consolidated Statement of Changes in Equity 79

Consolidated Statement of Cash Flows 80

Notes to the Consolidated Financial Statements 82

3

KAISUN HOLDINGS LIMITEDANNUAL REPORT 2020

Corporate Information

Board of DirectorsExecutive DirectorsMr. Chan Nap Kee, Joseph (Chairman)

Mr. Yang Yongcheng

Independent Non-Executive DirectorsMr. Liew Swee Yean

Dr. Wong Yun Kuen

Mr. Anderson Brian Ralph

Mr. Siu Siu Ling, Robert (retired on 30 December 2020)

Joint Chief Executive OfficersMr. Chen Chun Long

Mr. Ching Ho Tung, Philip

Company SecretariesMs. Young Helen

Mr. Wong Lok Man (appointed on 31 August 2020)

Mr. Yun Hon Man (resigned on 31 August 2020)

Audit CommitteeMr. Liew Swee Yean (Committee Chairman)

Dr. Wong Yun Kuen



Remuneration CommitteeDr. Wong Yun Kuen (Committee Chairman)

Mr. Chan Nap Kee, Joseph


Nomination and Corporate Governance CommitteeCommittee Chairman:


(appointed on 30 December 2020)


Member:

Mr. Liew Swee Yean

Mr. Chan Nap Kee, Joseph

Authorised RepresentativesMr. Chan Nap Kee, Joseph

Mr. Wong Lok Man (appointed on 31 August 2020)

Mr. Yun Hon Man (resigned on 31 August 2020)

Compliance OfficerMr. Yang Yongcheng

AuditorRSM Hong Kong

Registered OfficeCricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman KY1-1111

Cayman Islands

Head Office and Principal Place of Business in Hong Kong11/F, 46 Lyndhurst Terrace,

Central, Hong Kong

Hong Kong Branch Share Registrar and Transfer OfficeComputershare Hong Kong Investor Services Limited

17th Floor

Hopewell Centre

183 Queen’s Road East

Wanchai

Hong Kong

Principal BankersBank of Communications Co., Limited

OCBC Wing Hang Bank Limited

Websitewww.kaisun.hk

Stock Code8203

4


Financial Summary

A summary of the results and of the assets and liabilities of the Group for each of the last five financial years is set

out as below:

RESULTS

Year ended 31 December

2020 2019 2018 2017 2016

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue 35,958 138,566 146,100 90,680 35,218

(Loss)/profit before tax (69,705) (339,491) 7,159 73,754 (3,665)

Income tax credit/(expense) 5,438 14,430 1,890 4,543 (9,864)

Less: Loss from discontinued

operations — (3,408) (4,071) — —

Less: Loss/(profit) attributable

to non- controlling

interests 3,972 10,339 5,532 (28,990) 113

(Loss)/profit attributable to owners

of the Company (60,295) (318,130) 10,510 49,307 (13,416)

ASSETS AND LIABILITIES

As at 31 December

2020 2019 2018 2017 2016

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 353,790 340,886 665,872 562,404 306,544

Total liabilities (255,690) (181,709) (166,475) (81,870) (26,849)

Owners’ funds 75,151 125,312 454,026 439,114 287,206

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Chairman’s Statement

Witnessing how the COVID-19 pandemic had changed the world in 2020, we need to redefine what we consider as “normal”. The world is facing the worst recession since World War II.

Contraction in advanced economies went up to 5.6%, which in turn affected emerging markets and developing economies, leading to a contraction of 2.5% in 2020. Furthermore, emerging markets and developing economies faced plunging export revenues, uncertainties caused by large drop in demand for commodities amid sharp fall in remittances. China was the only major economy that recorded growth in 2020, delivering growth of 2.3% attributable to recovery of domestic economy in the 4th quarter.

Currently, we no longer can travel to Central Asia given their travel restrictions to outsiders are still uncertain while the UK still have lockdown measures in place. Except for China, we had regrettably left all other business arena in 2020 to avoid contracting COVID-19 pandemic in uncertain environment which without the pandemic would have been a good component of our Belt and Road value chain but the pandemic disrupted our game plan yet we quickly adapt to the changes.

China had always been our major business focus. While other countries were suffering from the pandemic, our far-sighted prediction that China will still be the major business focus paid off. China maintained its vitality in growth and lead the global economy.

Amid pandemic in 2020, quarantine policies in Hong Kong indirectly caused most of our business came to a halt. Starting from the 3rd quarter, Mainland China started to resume working, with domestic GDP recording a rise of 6.5% in the 4th quarter beating market expectations according to National Bureau of Statistics. The success of China in resuming work and production provided a blueprint for post-pandemic era.

Our management team overcame a lot of difficulties in 2020 and started a 63-days business trip to Mainland China, including a 14-days mandatory quarantine in Shenzhen, followed by travelling to Xinjiang Autonomous Region and met with Turpan government officials and our construction team to prepare for the coal mining, and ground work for 2020 annual audit. Based on our prediction that COVID-19 will still prevail in Hong Kong and globally during the first half of 2021, we curtail our operations in other regions and focus our effort in our business in Mainland China, so as to look forward to a breakthrough that can cover up our time lost in 2020. We are very positive on our Xingliang mine in Xinjiang and expected cash flow will turn good in the forthcoming 2nd quarter of 2021. As for Mongolia, COVID-19 is very uncertain in Mongolia and management can only be cautious on returning to Mongolia, it is expected revisiting the Mongolia Choir Project can start in 3rd quarter 2021.

By adapting ourselves to changing business environment amid pandemic in 2020, our Group adopted new business model of using Cloud by shifting our focus from offline to online. Our quick adaption kept our business in line with market. At time of writing this Chairman statement, “China Digital International Travel Pass” was launched providing digital health certificate for international travellers. Upon worldwide rolling out of vaccines against COVID-19, international trade and travel can gradually resume, when our business can gradually resume to normal.

Upon a much greater understanding of the virus now, I think overall situation had improved compared to a year ago. In times of difficulties that we now faced, our original inspirations remain intact for us to overcome the challenges ahead.

I would like to wish our shareholders, business partners, and every stakeholder to stay safe so we can all get out of this stronger and better, and express my sincere thanks to all our shareholders as well as investors of Kaisun Holdings.

6


Management Discussion and Analysis

MANAGEMENT DISCUSSION AND ANALYSISThe global economy in 2020 was hardly hit by the unprecedented COVID-19 pandemic, when the world faced the

greatest recession since World War II.

2020 was an extremely difficult year for Hong Kong when Hong Kong economy contracted 6.1% for the year, the

worst decline since record. With underemployment rate surging to a 16-year high at 6.6% in the fourth quarter,

the employment market deteriorated in 2020 resulting in an annual decline of 5.9%. Amid COVID-19 pandemic and

the development of China-US relations in 2020, market sentiment remained uncertain causing great fluctuations in

local stock market. As for tourism, an important sector for Hong Kong, visitors arrivals to Hong Kong of only 3.57

million was recorded for 2020, a drop of 93.6% compared to previous year, and was a 36-year low.

Adapting to COVID-19, our way of life and work had changed. Amid various partial border closures, curfews and

lockdowns adopted by many countries to contain spread of COVID-19 during the first half of 2020, production and

business activities were reduced. Our business activities that are not in Hong Kong were greatly restricted because

of travel restrictions imposed under COVID-19.

Therefore, “Towards the New Normal” became the Group’s main theme from second half to 2020, adopting new

concepts and new business models for our business trasnformation. Operationalwise, we shifted focus from physical

to online services. Financialwise, we kept cost under control and reduced administrative cost. These will be carried

forward to 2021. The Group will work together under this crisis.

Looking ForwardA rebound in global economy is expected in 2021 amid the implementation of mass vaccinations campaign. In late

January 2021, the International Monetary Fund (IMF) predicted a rise of 5.5% in 2021, however such recovery is

affected by uncertainties and will be spread unevenly across the globe.

Though seriously impacted by COVID-19, Hong Kong finance market showed its resilience and vitality. Fuelled by

154 IPO listings in the Hong Kong Stock Exchange, reaching a 10-year record high of HK$397.7 billion in 2020, an

increase of 26% from HK$315.5 billion in 2019. It is expected that 120–130 companies will choose to have IPO

listing in Hong Kong, raising more than HK$400 billion.

“The 14th Five-Year Plan” and its draft long-range objectives to 2035 has designated a chapter for the Hong Kong

and Macao special administrative regions, including positioning “Hong Kong as 3 Centres”: Hong Kong as

International Aviation Centre, International Centre of Innovation and Technology, International Centre of Art and

Cultural Exchange.

In addition, it was mentioned in this draft that building Belt and Road Initiative platform, developing

Guangdong-Hong Kong-Macao Greater Bay Area and the Pan-Pearl River Delta Regional Co-operation continued to

drive Hong Kong’s economic growth. Leveraging on competencies of both, China and Hong Kong can cooperate in

future development, further improving existing industrial structures and enhancing resource allocation in Hong

Kong. Having confidence that the new role of Hong Kong will revive Hong Kong’s economy, the Group believes we

can benefit from new opportunities arising in the upcoming three to five years.

7



“For moving fast, one can walk alone, while for moving far, we need to walk together” Our sincere thanks to all

the shareholders and investors of the Group who supported us through this journey. In 2021, management of the

Group will enhance communication and cooperation throughout the Group, steadily improve our performance and

hoping that our hard work will bring return.

KAISUN ENERGY GROUPMining, manufacturing of machinery & supplyi. Shandong — Mining and Metallurgical Machinery Production

Tengzhou Kaiyuan Industrial Co., Ltd. (“Tengzhou Kaiyuan”), a joint venture of a subsidiary company of the

Group, specializes in mining and metallurgical machinery production and owns 32 sets of safety certificates for

mining products. Its major products are overhead manned cableway device and its accessories, as well as

technical consultancy services including equipment installation, technical support and after-sales services.

Updates on China’s mining machinery manufacturing industry in 2021The tightening of coal import policy including an official ban on imports of Australian coal lead to significant

drop in China’s coal import last year. According to the National Bureau of Statistics, there was a decrease of

46.56% in October 2020 compared to the same period last year with only around 13.72 million tonnes of

coal imported; a decrease of 43.8% in November 2020 compared with same period last year with only

around 11.67 million tonnes of coal. From January to November, coal import decreased by 10.8% and was

265 million tonnes.

Amid low temperatures prevalent last year, demand for coal from electricity power stations, steel and

construction industry increased compared with previous year according to the National Development and

Reform Commission.

Our view is China will continue to adopt its current policy of reducing its reliance on foreign coal while

utilizing domestic coal. Such policy together with increase in domestic demand for coal will likely result in

increasing the demand for mining machineries, creating an expanded market for mining machineries where

Tengzhou Kaiyuan will benefit.

(Retrieved source: https://www.hk01.com/%E5%8D%B3%E6%99%82%E4%B8%AD%E5%9C%8B/568973/%E7%85%A4%E5%83%B9%E5%

A4%A7%E6%BC%B2-%E5%85%A7%E5%AA%92-%E8%8F%AF%E5%8D%97%E9%9B%BB%E5%BB%A0%E4%B8%8D%E5%B0%91%E5

%8F%AA%E7%94%A8%E6%BE%B3%E6%B4%B2%E7%85%A4-%E9%99%90%E6%BE%B3-%E8%87%B4%E7%B5%90%E6%A7%8B%E6

%80%A7%E7%9F%AD%E7%BC%BA)

https://www.hk01.com/%E5%8D%B3%E6%99%82%E4%B8%AD%E5%9C%8B/568973/%E7%85%A4%E5%83%B9%E5%A4%A7%E6%BC%B2-%E5%85%A7%E5%AA%92-%E8%8F%AF%E5%8D%97%E9%9B%BB%E5%BB%A0%E4%B8%8D%E5%B0%91%E5%8F%AA%E7%94%A8%E6%BE%B3%E6%B4%B2%E7%85%A4-%E9%99%90%E6%BE%B3-%E8%87%B4%E7%B5%90%E6%A7%8B%E6%80%A7%E7%9F%AD%E7%BC%BA

8



Tengzhou Kaiyuan Highlights for the year• Amid COVID-19 outbreak in 2020, lockdown policies were adopted in many cities in China to reduce the

further spread of COVID-19, including mandatory requirement of workers to stay at home until central

government allowed resumption of work. Such government policies resulted in slow down in operations

of Tenzhou Kaiyuan in the 1st and 2nd quarter of 2020.

• During the 3rd quarter, our research provided 2

models of brand new mining machineries, with

improved machinery performance and raised level

of safety. Our effort in research succeeded in the

4th quarter when these 2 brand new mining

machineries were launched into the market,

enhancing competitiveness in our brand.

• In the 4th quarter, Tengzhou Kaiyuan actively

followed up on the collection of accounts

receivable in order to improve liquidity and

alleviate cash flow pressure.

Production plant gradually resuming operations

• COVID-19 accelerated its spread globally, drag

down China’s economy growth and caused

negative impact to coal industry. Amid such

business environment, Tengzhou Kaiyuan

generated revenue of approximately HK$20.07

million in 2020.

9



ii. Shandong — Supply Chain Management ServicesShandong Kailai Energy Industrial Co., Limited (“Shandong Kailai”) is a joint venture between a subsidiary of

the Company and Shandong Bayi Coal Electrochemical Co., Ltd.

Shandong Kailai specializes in coal supply chain management, warehouse and logistics management as well as

loading and unloading service. It has the right to use a section of railway permitted by China’s Jinan Railway

Bureau. Shandong Kailai’s logistics centre is located at China’s railway hub with a number of state-owned

enterprises nearby. At present, Shandong Kailai’s logistics centre, including environmental protection facilities

and storage centre, has a total area of 110,000m², with an annual loading capacity of 3 million tons.

Updates on the impact of COVID-19 on China’s coal rail transportation in 2021Amid epidemic came under control in China, economic recovery is underway and downstream demand

gradually recovered. According to China Railway, China’s rail cargo volume reached 3.58 billion tons in 2020,

an increase of 141 million tons and 4.1% compared to that of last year, supporting rail transportation already

returned to normal.

As China continued its policy to tightening import of coal, in order to ensure that supply of coal is steady to

meet the demand, China’s domestic production of coal increased significantly, resulting in raising coal supply

chain business as well. In January 2021, coal transportation volume by rail increased by 23% compared to

that of last year, and reached 1.2 million tonnes.

Increase in coal demand will lead to increase in demand for coal supply chain business. The Group is of the

view that when the epidemic gradually comes under control, Shandong Kailai’s coal supply chain business will

benefit.

(Retrieved source: http://www.xinhuanet.com/politics/2021–02/05/c_1127066090.htm)

(Retrieved source: http://www.hkcna.hk/content/2021/0203/877558.shtml)

Shandong Kailai for the year• Amid nationwide lockdown, Shandong Kailai could only maintain limited services in the 1st and 2nd

quarter.

• During the low season in the 3rd and 4th quarter, Shandong Kalai made use of such opportunity to

implement internal renovation, including construction of a brand new storage centre by expanding its

eastern platform so as to raise overall storage capacity, introducing a fully enclosed environmental

friendly design facility so as to suppress dust pollution.

10



• The expansion of the eastern platform of Shandong

Kailai was close to completion in the 4th quarter.

The platform is planned to commence operations

in the 1st quarter of 2021.

• The outbreak of COVID-19 caused major supply

chain disruptions in the coal industry, resulting in

an oversupply of coal, stocks of coal were piled up

caused by reduced transportation of coal. As a

result, Shandong Kai lai recorded revenue

approximately HK$10.40 million in 2020.

Preparation work for the

expansion of Eastern Platform

iii. Xinjiang — Coal Exploitation Business (wholly owned subsidiary of Shandong Kailai)Xinjiang Turpan Xingliang Mining Co., Limited (“Xingliang Mine”) is a wholly owned subsidiary of Shandong

Kailai. It is located in Qiquanhu Town, Turpan City within the Tuha coal field area, which is one of the four

major coal fields in Xinjiang province. Long-flame coal used mainly by power station and chemical industries is

the core product of Xingliang Mine. In 2018, an integrity agreement was signed between Xingliang Mine and

the Turpan Gaochang District Government for the consolidating the nearby small-scale coal, with Xingliang

Mine as the main body of the consolidation project.

To facilitate the consolidation project, Xingliang Mine was officially granted exploration license of 1.2 million

tons on 11 August 2020. Moreover, the application for coal fire extinguishment work is under processing, and

is expected to be approved in the 1st quarter of 2021. To prepare for the commencement of coal fire

extinguishment work, a cooperation agreement has been reached with Shannxi Jinyuetai Engineering

Company for the coal fire extinguishment project.

Analysis of Xinjiang’s coal industry in 2021Being rich in coal resources, Xingjiang is one of China’s largest bases in coal, coal power and coal chemical.

In 2020, the National Energy Administration approved a total of 22 coal projects, of which 20 were in

Xinjiang, reflecting China’s shift in selecting Xinjiang in coal production and the region’s importance in the

nation’s coal production.

According to National Bureau of Statistics, Xinjiang transmitted 11.2 billion kWh of electricity, an increase of

55% in January 2021 compared to that of last year. In addition, according to the Xinjiang Power Trading

Centre, Xingjiang plans to export a record-high 110 billion kWh of electricity in 2021, reflecting Xinjiang’s all-

round supporting facilities for coal industry and its adequate supply in coal and electricity.

11



Xingliang Mine enjoys strategic geographic advantages, as it is surrounded by power stations and chemical

companies nearby. With steady demand for coal and the support of macro policy of the government, it is

expected that Xingliang Mine will bring steady revenue to the Group.

Xingliang Mine for the year• During the 2nd quarter, a public auction was held to complete the consolidation of nearby small-scale

mines, and as a result, our mining area was increased from 1.1 sq.km. to 8.864 sq.km.

• As there were spontaneous combustions in the

mining area, construction teams were invited by

Xingliang mine and collaboration was reached

with Joint Geological Survey Team of Coal

Geology Bureau of Xinjiang Uygur Autonomous

Region for preparing technical report to be

submitted to the Turpan government for

application for coal fire extinguishment project.The coal fire extinguishment project will be carried out

in the form of stripping and leveling

• Xingliang Mine had completed the preliminary

application for the coal fire extinguishment

project in the 2nd quarter. The project is in the

final stages of application in the 3rd quarter.

• Under the collaboration with the Joint Geological

Survey Team of Coal Geology Bureau of Xinjiang

Uygur Autonomous Region, Xingliang Mine

preliminarily completed the technical report for the

coal fire extinguishment project in the 3rd

quarter, and had reached an agreement with a

construction team to conduct fieldwork for the

project. More teams will be introduced for the

project.

12



• Xingliang Mine had been preparing the

application for the mining license of 1.2

million tons in the 4th quarter.

iv. Mongolia — Supply Chain Management BusinessThe railway logistics platform in Choir, Mongolia is located at a strategically important conduit between

Russia and China, and has a unique geographical advantage on the trilateral trade between China, Mongolia

and Russia. The railway logistics platform covers a total area of 35,000m² with an annual loading capacity of

1.8 million tons. It mainly provides loading and unloading services, customs declaration, warehousing and

logistics services.

Analysis of Mongolia’s mining industry amid COVID-19 pandemic in 2021Due to the unprecedented COVID-19 pandemic, Mongolia’s coal output and exports declined significantly in

2020, in particular from February to August. As improvement in pandemic was seen in September and

October, its coal output and exports increased significantly. However, since November, its coal output and

exports saw a steep decline again as Mongolia experienced another wave of COVID-19.

Mongolia produced 40.486 million tons of coal in 2020, a decrease of 10.337 million tons and 20.3%

compared to the same period last year, according to National Statistical Office of Mongolia.

In view of Mongolia’s recurrence of COVID-19 cases and its stringent containment measures, the Group has

temporarily suspended the construction of Choir Logistics Centre. The Group, however, believes that the

escalation in Sino-Australian trade tensions would prompt China to strengthen trade ties with Mongolia and

deepen their comprehensive strategic partnership, which will benefit the business development of Choir

Logistics Centre in the long run.

(Retrieved source: https://coal.in-en.com/html/coal-2590587.shtml)

Choir Project for the year• Due to the stringent COVID-19 containment measures, the construction of Choir Logistics Centre was

temporarily halted in the 1st and 2nd quarter of 2020.

• Due to differing views between the Group and the vendor regarding the contractual interpretation of the

clauses on the fulfillment of obligations of Choir Logistics Centre, the aforementioned clauses are still

under negotiation with the vendor.

13



AGRICULTURAL INVESTMENT AND DEVELOPMENTKaisun Group continues to provide professional guidance and services on internal control and audit to support the

business development of Cheung Lee Agricultural Co., Limited (“Cheung Lee”) such as daily operation, financial

control, legal advice and development in other aspects.

Over the past two decades Cheung Lee has evolved into an agricultural integrator that provides unique green agri-

food industry chain solutions, consisting of modern farming, cultivation management as well as physical and online

sales platforms connecting both Chinese and international green food wholesale and retail businesses.

At present, Cheung Lee owns approximately 8,000 mu of agricultural base and 1,500 mu of fruit plantation base.

Cheung Lee Highlights for the year• To expand the sales channels of “Natural Vegetable”, Cheung Lee launched a flagship store on online shopping

platform HKTVmall in the 3rd quarter, and began exporting its vegetables to supermarkets in North London.

• In the 4th quarter, Cheung Lee formulated strategies on the sales of “Natural Vegetable” and tea, with the

focus shifting towards to trading of tea, and had plans for its tea to enter the online leisure food sales

platform in the Mainland as well as distributing them to various markets around the world.

FIRST QUARTER 2021 DEVELOPMENT GOALSIn order to meet our pre-pandemic targets, Kaisun Group will step up our efforts to make sure our production

return in full force as soon as possible and accelerate business expansion. The Group’s business goals in the 1st

quarter are as follows:

Shandong — Mining and Metallurgical Machinery Production• Due to the continuous spread of COVID-19, lockdown measures were implemented in a few cities including

the suspension of work leading to slowdown of production, and delayed the delivery of products of Tengzhou

Kaiyuan, resulting in below normal sales revenue in 2020. The logistics and transportation issues were

expected to be improved in the 1st quarter of 2021, after which steady growth with more revenue to the

Company is expected.

Shandong — Supply Chain Management Services• The newly constructed, fully-enclosed and environmentally-friendly storage centre located at the eastern platform

will commence operations in the 1st quarter of 2021, increase storage capacity while meeting environmental

standards and putting environmental sustainability into practice.

• Shandong Kailai tried to increase trade volume in 2021 as part of its plan to increase revenue.

14



Xinjiang — Coal Exploitation Business• In light of the recurrence of COVID-19 cases, Xinjiang announced a region-wide lockdown again, which caused

delay in the final stages of approval for the coal fire extinguishment project. Nevertheless, the construction

team is on standby in Xingliang Mine in the 1st quarter of 2021 and will kickstart the coal fire

extinguishment project once the final approval is completed. Not only can the project help to maintain a safe

working environment at the mine, it can also generate extra revenue for the Group.

• The application procedures for the mining license of 1.2 million tons for Xingliang Mine is under preparation.

Mongolia — Supply Chain Management Business• Due to stringent COVID-19 containment measures in Mongolia, the Group is unable to hold negotiations with

the vendor regarding the contractual interpretation of the clauses on the fulfillment of obligations of Choir

Logistics Centre, but remains optimistic of completing the entire acquisition and commencing construction as

soon as possible.

Agricultural Investment and Development• Cheung Lee plans to develop its vegetable segment, with plans to further improve its facilities in the Yunnan

agricultural base and expand its business scale.

• Cheung Lee has been formulating domestic sales strategies for vegetables, fruits and tea, with plans to increase

its market share and brand reputation in the Mainland.

KAISUN BUSINESS SOLUTIONSEvent Management & Media Production ServicesPeople’s Communication & Consultant Company Limited and VOV Studio were greatly affected by the pandemic in

2020 as almost all of the local events were delayed or cancelled. Moreover, Covid-19 has dramatically reshaped

global MICE (Meetings, incentives, conferences and exhibitions) industry. Such changes in norms of industry render

adaptation of business most important.

To adapt to such changes in industry, our team launched new services such as hybrid event & video conferencing

full-service package, and launched its Wechat official account for offering more personalized services to customers.

Esports Business2020 was year of change to the development of Evoloop Limited, our E-sport company. Since the launch of

GIRLGAMER Esports IP in 2017, the team launched this offline international event for building brand influence every

year. In February 2020, the team had successfully held GIRLGAMER Finals in Dubai. However, travel restrictions and

social distancing rules during the pandemic resulted in offline events could not be held. In order to increase brand

exposure and business revenue, the team decided to move this event from offline to online. The GIRLGAMER

Challenge is the new online competition in 2021 under the GIRLGAMER brand, which will be held online across

Europe, North and South America, Oceania, Africa and Asia. Best female esports teams from the globe will gather

to compete for the titles. The competition will be held online from March to May of 2021.

15



Kaisun TrustSince the establishment in 2019, Kaisun Trust and Trustee Services Limited (“Kaisun Trust”) has been committed to

providing fiduciary services and fund administration services. Having steady clients, Kaisun Trust was less affected by

the pandemic. In 2020, Kaisun Trust made great efforts on market promotion and all the efforts paid off. The total

size of assets under administration has increased during the year of 2020.

Looking into the future, Kaisun Trust believes that it will continue to witness growth in the total size of assets

under administration, targeting to reach US$200,000,000 in the first half of 2021. Kaisun Trust will also strive to

expand its client base and bring in steady cash flow for the Group.

Investment Platform DevelopmentThe cooperation between the group and fund company Sturgeon Capital Limited (“Sturgeon”) started when

Covid-19 pandemic had not started. In the second half of 2020, it was expected that the pandemic could be

effectively controlled when citizens could be vaccinated and normal daily travelling and economic activities in the UK

as well as Belt and Road countries and regions could resume. However, Covid-19 pandemic worsened in UK and

Belt and Road countries, impeding the region’s economic activities. As London was locked down in the past year,

Sturgeon, our UK fund company had also been seriously affected, resulting in stagnation of its business activities

for a long period. Therefore, the company is facing deficiency in its operating capital. We do not expect UK and

any of the Central Asia Belt and Road markets to recover anytime soon and we can only reduce our resources in

this regard.

Securities Trading BusinessThe Group’s listed-securities trading business continued to be monitored by the investment committee with

analytical and performance reports generated regularly. As the US-China trade war was still stalemate at the end of

2019, the unexpected COVID-19 outbreak in 2020 had beaten all social, political, and financial market forecasts. It

also brought economic activities to a near-standstill as countries around the world suffered from lockdown,

curfews, wave of closures and lay-offs. The pandemic is still not under control as the number of confirmed cases

and deaths continued to rise. Nevertheless, in view of availability of COVID-19 vaccine in 2021, market confidence

was raised and it is hoped that by the end of the year, global economy can return to normal level before the

coronavirus outbreak.

As at 31 December 2020, the fair value of listed investment was approximately HK$36.3 million. The cost of listed

investment was approximately HK$57.4 million.

In 2020, part of our existing securities portfolio recorded an unrealized loss. The unrealized fair value loss was

approximately HK$18.1 million. Dividend received from listed securities was approximately HK$71,000.

Hong Kong stock market last year lagged behind compared to the other countries during the reporting period. The

Investment Committee is looking forward to a recorrection to the more positive side in 2021 when the vaccine are

in full service. The investment committee will put more resources into value stock in the big data new economy

sector.

16



FINANCIAL REVIEWRevenue of the Group for the year ended 2020 amounted to approximately HK$36.0 million, represented a

decrease of approximately 74.0% when compared with the same period in 2019 (2019: HK$138.6 million). Revenue

arising from the sales of goods and provision of services amounted to approximately HK$24.9 million and HK$11.1

million respectively. Drop in revenue was mainly attributable to outbreak of coronavirus which stopped most of our

operations since the first quarter in 2020.

The Group’s gross profit for the year ended 2020 decreased approximately 38.8% to approximately HK$13.4 million

when compared with the same period in 2019 (2019: HK$21.9 million). Gross profit arising from the sales of goods

and provision of services amounted to approximately HK$9.2 million and HK$4.2 million respectively. Drop in gross

profit was due to drop in revenue caused by the reason mentioned in previous paragraph.

For the year ended 2020, the total administrative and other operating expenses was approximately HK$60.2 million,

a decrease of approximately 15.1% as compared with the same period in 2019 (2019: HK$70.9 million). Such drop

of total administrative and other operating expenses for the year ended 2020 was mainly attributable to human

resources restructuring in late 2019.

For the year ended 2020, the loss from continuing operations was approximately HK$64.3 million (2019: loss from

continuing operations HK$325.1 million). The loss from continuing operation was mainly attributable to the

impairment loss on trade and other receivables of approximately HK$4.8 million and fair value loss on financial

assets at fair value through profit or loss (“FVTPL”) of approximately HK$18.1 million. The Group recorded loss for

year ended 2020 of approximately HK$64.3 million (2019: HK$328.5 million).

The total comprehensive loss attributable to owners of the Company for the year 2020 amounted to approximately

HK$50.3 million (2019: HK$323.8 million).

17



As at 31 December 2020, the Group held financial assets at FVTPL of approximately HK$36.3 million, wholly

comprised of listed investment in securities listed in Hong Kong. In the midst of poor performance of Hong Kong

stock market in 2020, the gain on disposal of financial assets at FVTPL amounted to approximately HK$1.0 million

(2019 loss on disposal: HK$28.6 million), whilst the fair value loss on financial assets at FVTPL was approximately

HK$18.1 million for the year ended 2020 (2019: HK$24.5 million). The details of financial assets at FVTPL are set

out as follow:

Company Name

Number of shares held

as at 31 December

2020

% of share-

holding as at 31 December

2020

Unrealized gain/(loss)

on fair value change for

the year ended

31 December 2020

Dividends received for

the year ended 31

December 2020

% of the Group’s net assets as at

31 December 2020

Investment cost

Reasons for fair value loss

Fair value as at31 December

202031 December

2019HK$ HK$ HK$ HK$ HK$

Hong Kong Listed SecuritiesBOC Hong Kong (Holdings) Limited

(2388) (Note 1)15,000 0.0001% (53,250) 21,585 352,500 405,750 0.36% 462,750 Drop in share

priceEJE (Hong Kong) Holdings Limited

(8101) (Note 2)9,800,000 2.82% (6,340,796) — 4,557,000 10,323,000 4.65% 14,020,604 Drop in share

priceHSBC Holdings plc (0005) (Note 3) 20,000 0.0001% (200,000) — 815,000 — 0.83% 1,015,000 Drop in share

priceWealthking Investments Limited

(1140) (Note 4)17,476,000 0.60% (11,033,680) — 14,679,840 26,496,000 14.96% 24,943,440 Drop in share

priceTarget Insurance (Holdings) Limited

(6161) (Note 5)18,052,000 3.46% 269,480 — 10,470,160 9,956,100 10.67% 10,783,610 —

Tesson Holdings Limited (1201) (Note 6)

13,215,000 1.10% (781,155) — 5,418,150 — 5.52% 6,199,305 Drop in share price

Cathay Pacific Airways Limited (0293) (Note 7)

— — — — — 345,600 — — —

China Petroleum & Chemical Corporation (0386) (Note 8)

— — — — — 938,000 — — —

Hong Kong Exchanges and Clearing Limited (0388) (Note 9)

— — — — — 3,795,000 — — —

Tsui Wah Holdings Limited (1314) (Note 10)

— — — — — 229,620 — — —

Total (18,139,401) 21,585 36,292,650 52,489,070 36.99% 57,424,709

18



Notes:

1. BOC Hong Kong (Holdings) Limited (HKEx: 2388) — The principal activities of BOC Hong Kong (Holdings) Limited is the provision of banking

and related financial services.

2. EJE (Hong Kong) Holdings Limited (HKEx: 8101) — The principal activity of EJE (Hong Kong) Holdings Limited is investment holding. The principal

activities of the EJE (Hong Kong) Holdings Limited’s subsidiaries are: (i) The design, manufacture and sales of mattress and soft bed products;

(ii) property investment; (iii) securities investment; and (iv) the provision of property management and property agency services.

3. HSBC Holdings plc (HKEx: 0005) — HSBC Holdings plc products and services are delivered to clients through four global businesses: Retail

Banking and Wealth Management (“RBWM”), Commercial Banking (“CMB”), Global Banking and Markets (“GB&M”) and Global Private

Banking (“GPB”).

4. Wealthking Investments Limited (Formerly known as OP Financial Limited) (HKEx: 1140) — The principal investment objective is to achieve

earnings for the Company in the form of medium to long term capital appreciation through investing in a diversified portfolio of global

investments in listed and unlisted enterprises.

5. Target Insurance (Holdings) Limited (HKEx: 6161) — Target Insurance (Holdings) Limited is principally engaged in writing of motor insurance

business in Hong Kong.

6. Tesson Holdings Limited (HKEx: 1201) — Tesson Holdings Limited is principally engaged in Lithium Ion Motive Battery Business and Property

and Cultural Business during the year.

7. Cathay Pacific Airways Limited (HKEx: 0293) — Cathay Pacific Airways Limited is principally engaged in operating scheduled airline services,

airline catering, aircraft handling, aircraft engineering and cargo terminal operation.

8. China Petroleum & Chemical Corporation (HKEx: 0386) — China Petroleum & Chemical Corporation is principally engages in oil and gas and

chemical operations in the People’s Republic of China (the “PRC”). Oil and gas operations consist of exploring for, developing and producing

crude oil and natural gas; transporting crude oil and natural gas by pipelines; refining crude oil into finished petroleum products; and

marketing crude oil, natural gas and refined petroleum products. Chemical operations include the manufacture and marketing of a wide

range of chemicals for industrial uses.

9. Hong Kong Exchanges and Clearing Limited (HKEx: 0388) — Hong Kong Exchanges and Clearing Limited is Own and operate the only stock

exchange and a futures exchange in Hong Kong and their related clearing houses, trading of base metals forward and options contracts

operating in the UK.

10. Tsui Wah Holdings Limited (HKEx: 1314) — Tsui Wah Holdings Limited is principally engaged in the provision of food catering services through

a chain of Hong Kong-style restaurants in Hong Kong, the People’s Republic of China (the “PRC” or “Mainland China”) and Macau.

19



As at 31 December 2020, the Group held financial assets at fair value through other comprehensive income

(“FVTOCI”) and investment in associates of approximately HK$19.1 million and HK$nil respectively, wholly

comprised of unlisted equity securities in Hong Kong and United Kingdom and redeemable preference shares. The

details of financial assets at FVTOCI and investment in associates at investment cost are set out as follow:

Company Name

Number of

shares held

as at

31 December

2020

% of

shareholding

as at

31 December

2020

% of the Group’s

net assets as at

31 December

2020

Investment cost

as at

31 December

2020

as at

31 December

2019

HK$ HK$

Financial assets at FVTOCI

Cheung Lee Farming Corporation (Note 1) 870 8.7% 8.87% 8,700,000 8,700,000

Connect-Me Technologies Limited (Note 2) 990 9.9% 0.001% 990 990

Xin Ying Holdings Limited (Note 3) 8,000,000 N/A 8.15% 8,000,000 8,000,000

17.02% 16,700,990 16,700,990

Investment in associates

SCH Limited (Note 4) 45,560 45.56% — 8 8

Sturgeon Capital Limited (Note 4) 24,999 9.96% — 7,800,000 7,800,000

— 7,800,008 7,800,008

Notes:

1. Cheung Lee Farming Corporation incorporated under the laws of the British Virgin Islands with limited liability. The principal activities of the

company together with its subsidiaries are engaged in the business of production and distribution of pollution-free vegetables.

2. Connect-Me Technologies Limited under the laws of the Hong Kong SAR with limited liability. They engaged in sale of electronic consumer

products, key products including tablet PCs, smartphones, smartwatches, smart crutches, VR, electric self-balancing scooters, etc.

3. The principal activity of Xin Ying Holdings Limited (“Xin Ying”) is investment holding. Xin Ying’s subsidiaries combine the development of

financial globalization and internet information technology innovation mean to provide innovative and efficient financing, assessment,

consulting management, interconnection, financial e-commerce and more professional financial services for domestic enterprises and individual

customers in PRC. Xin Ying’s subsidiaries hold two types of credit license — 融資性擔保機構經營許可證 and 深圳市小額貸款業務資格.

20



4. Sturgeon Capital Limited (“Sturgeon Capital”) is a London-based investment manager specializing in Belt and Road. As stated in the Company’s

announcement dated 11 November 2019, we acquired 45.56% equity interest in SCH Limited, the company which holds approximately

90.04% of equity interest in Sturgeon Capital (“Acquisition”).

For more information on this Acquisition, please refer to Note 23 to the Consolidated Financial Statements in P.142–143 of Annual Report

2019 dated 23 November 2020.

During the year ended 31 December 2020, the directors of the Company had negotiation with the controlling parties of SCH Group for

cancellation of share swap and restructuring arrangement.

To provide cash flow for running Sturgeon Capital, on 25 January 2021, Sturgeon Capital issued and allotted 750,000 ordinary new shares,

when Kaisun’s Energy Management Limited effective shareholdings in Sturgeon Capital was diluted to 12.8%.

The directors of the Company confirmed that the negotiation has not finalised up to the date of approval of these consolidated financial

statements. As such, the management of the Group determined to make full impairment on the investment amount in the associates at the

end of the year so as to reflect the potential risk of loss.

LIQUIDITY AND FINANCIAL RESOURCESAs at 31 December 2020, the Group has bank and cash balances of approximately HK$24.3 million (2019: HK$27.5

million).

On 24 August 2018, the Company issued an 8% Unlisted straight bonds due 2020 in an aggregate principal

amount of HK$50,000,000. Of this principal amount, HK$30,000,000 of net proceeds was allocated for our

acquisition of Mongolia Choir Railway Platform and used in manner as set out in the Company’s announcement

dated 20 December 2018, and the remaining net proceed will be used for trading business.

During the year, a supplementary agreement was entered by the Company and holders of the Bonds in which the

repayment date of the Bonds was extended to 23 August 2021 and the interest rate had been increased from 8%

per annum to 10% per annum.

GEARING RATIOThe Group’s gearing ratio, which represents the ratio of the Group’s bonds payables over the Group’s total assets,

was 0.14 as at 31 December 2020 (2019: 0.15).

FOREIGN EXCHANGE EXPOSUREMajority of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars,

Renminbi (“RMB”), United States dollars and Tajikistan Somoni. As at 31 December 2020, the Group had no

significant exposure under foreign exchange contracts, interest, currency swaps or other financial derivatives.

21



INCOME TAXDetails of the Group’s income tax expense for the year 2020 are set out in note 11.

HUMAN RESOURCESAs at 31 December 2020, the Group had 117 (2019: 123) staffs in Hong Kong and China.

The Group continues to employ, promote and reward its staff with reference to their performance and experience.

In addition to their basic salaries, the Group’s employees are also entitled to other fringe benefits such as provident

fund. The management will continue to closely monitor the human resources requirements of the Group, and will

also put emphasis on the staff quality. During the year 2020, the Group had not experienced any significant labour

disputes which led to the disruption of its normal business operations. The Directors consider the Group’s

relationship with its employees to be good.

The total staff costs, including Directors’ emoluments, amounted to approximately HK$23.8 million (2019: HK$26.9

million) for the year 2020.

SEGMENT REPORTThe detailed segmental analysis are provided in note 46.

CONTINGENT LIABILITIESThe Group did not have any significant contingent liabilities as at 31 December 2020.

LITIGATIONAs at 31 December 2020, the Group had no significant pending litigation.

EVENTS AFTER THE REPORTING PERIODEvents after the reporting period are set out in note 47.

22


Biography of Directors and Senior Management

EXECUTIVE DIRECTORSMr. Chan Nap Kee, Joseph, aged 60, is the chairman, member of Remuneration Committee and Nomination and

Corporate Governance Committee of the Group. He was appointed as an executive director in September 2008. He

received his master degree majoring in international marketing from the University of Strathclyde and a diploma in

China Investment and Trade from Peking University.

Mr. Chan has over 30 years of experience in commercial and investment banking, and asset management. From

1994 to now, Mr. Chan has been a founding partner of Oriental Patron Financial Group where he is also executive

director of Oriental Patron Asia Limited and a non-executive director of Oriental Patron Securities Limited. He is

independent non-executive director, member of each of Audit Committee, Remuneration Committee and

Nomination Committee of North Asia Strategic Holdings Limited (Stock Code: 8080), a company listed on the GEM

of the Stock Exchange. On social services, Mr. Chan is Chairman of Silk Road Economic Development Research

Centre, Executive Vice President of Hong Kong Energy and Minerals United Association, Vice Chairman of China

Hong Kong Economic Trading International Association and Vice President of Federation of Hong Kong Hubei

Association and Honorary Advisor of Xinjiang Association of Hong Kong.

He holds licenses respectively of Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on

corporate finance), and Type 9 (asset management) under the Securities and Futures Ordinance (cap. 571 of the

Laws of Hong Kong).

Mr. Yang Yongcheng, aged 51, was appointed as an executive director in February 2009, and compliance officer

with effect from 31 December 2016. He graduated from the Yikezhao League School of Finance (伊盟財經學校) in

Inner Mongolia of the PRC and the China Central Radio & TV University, majoring in financial accounting. He holds

an EMBA from the Zhongnan University of Economics and Law.

Mr. Yang has been involved in senior positions for corporate management for a long period of time, has profound

knowledge of the human and economic development environment in the Mengxi region of Inner Mongolia of the

PRC, and possesses extensive experience in corporate investment, product and market development as well as

operation of minerals enterprises.

23



INDEPENDENT NON-EXECUTIVE DIRECTORSMr. Liew Swee Yean, aged 57, is chairman of audit committee and member of Nomination and Corporate

Governance Committee, and has over 20 years of experience in finance and general management, and is a fellow

member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public

Accountants. Mr. Liew holds a Master of Business Administration (Executive) Degree from the City University of

Hong Kong.

Mr. Siu Siu Ling, Robert, aged 68, is chairman of Nomination and Corporate Governance Committee, member of

audit committee and remuneration committee until he retired on 30 December 2020. He is a sole proprietor of the

firm Messrs. Robert Siu & Co., Solicitors. Mr. Siu is an independent non-executive director of Finet Group Limited

(Stock Code: 8317) Future World Financial Holdings Limited (Stock Code: 572), all of which are listed on the Hong

Kong Stock Exchange.

Mr. Siu holds a bachelor’s degree in laws from the University of London and a postgraduate certificate in laws from

the University of Hong Kong. He also holds a Master of Laws from the University of Greenwich, U.K. He has been

admitted as a solicitor in Hong Kong since 1992 and has been admitted as a solicitor in England and Wales since

1993. His main legal practice is in the field of commercial and corporate finance.

Dr. Wong Yun Kuen, aged 63 is the chairman of Remuneration Committee and member of audit committee. He

received two B.S. degrees in Geology and Mathematics from University of Wyoming, and Master and Ph.D. degree

in Geophysics from Harvard University, and was “Distinguished Visiting Scholar” in finance at Wharton School of the

University of Pennsylvania. Dr. Wong has worked in financial industries in the United States and Hong Kong for

many years, and has considerable experience in corporate finance, investment and derivative products. He is a

member of Hong Kong Securities Institute and a life member of American Geophysical Union.

He is the chairman and executive director of both UBA Investments Limited and the independent non-executive

director of GT Group Holdings Limited.

He was the chairman and executive director of Far East Holdings International Limited until 22 December 2020,

non-executive director of China Sandi Holdings Limited until 29 September 2019, and the independent

non-executive director of DeTai New Energy Group Limited, Synergis Holdings Limited until 22 December, 2020,

China Asia Valley Graphene Group Limited until 29 December 2020, Kingston Financial Group Limited until

28 August 2019, Boill Healthcare Holdings Limited (formerly known as “Ngai Shun Holdings Limited”) until

21 December 2018. All are listed on the Stock Exchange. He was also independent non-executive director of

formerly listed companies Asia Coal Limited until 6 June 2019, and Tech Pro Technology Development Limited until

2 March 2020.

24



Mr. Anderson Brian Ralph, aged 77, is chairman of Nomination and Corporate Governance Committee since

30 December 2020, member of audit committee and remuneration committee. He holds a Bachelor of Science

Degree in Metaliferous Mining Engineering from the Camborne School of Mines, the University of Exeter and a

Master of Science Degree in Petroleum Reservoir Engineering from the University of London.

Mr. Anderson has more than 50 years of global experience (of which 32 years with Shell International) in the

mining and energy resources industries.

During his tenure as a Chairman of Royal Dutch/Shell Group of Companies (“Shell”) in North East Asia, he was

responsible for developing Shell’s future business, in particular through the formation of important strategic

alliances with two of the major state-owned Chinese petroleum corporations, which have since led to multi-billion

dollar investment commitments in the petroleum and petrochemicals sectors in China, including important new

business opportunities in coal gasification.

Mr. Anderson’s China experience also includes a 6-year involvement with the prestigious China Council for

International Co-operation on the Environment and Development and which includes Ministerial and Vice-Ministerial

level appointees from within the PRC government, and top-level international members from government and global

multilateral organization and businesses. He represented the Shell’s group of companies as a council member for 4

years, and has participated as a member of two taskforces involved with energy and sustainable development policy

for China.

Mr. Anderson is chairman and managing director of Anderson Energy (Hong Kong) Limited, an energy consulting

firm advising corporate clients globally, Chairman of Criterium Energy, a Canadian registered company with Oil and

Gas development interests in the APAC region, Director of The Addax and Oryx Foundation, a Swiss-based Charity

with main interests in Africa and the Middle East, and Director of SLY (Asia) Limited, a marketing consulting

company registered in Hong Kong.

SENIOR MANAGEMENTAll the executive directors of the Company are respectively responsible for various aspects of the business and

operation of the Group. All executive directors are regarded as members of the senior management team of the

Group.

25


Directors’ Report

The board (“Board”) of directors (“Directors”) of the Company is pleased to submit its report together with the

audited consolidated financial statements (“Financial Statements”) of the Company and its subsidiaries (collectively

as “the Group”) for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES AND SEGMENT ANALYSIS OF OPERATIONSThe principal activity of the Company is investment holding. The activities of the subsidiaries are set out in note 41

to the Consolidated Financial Statements.

An analysis of the Group’s performance for the year ended 31 December 2020 by segments is set out in note 46

to the Consolidated Financial Statements.

RESULTS AND APPROPRIATIONSThe results of the Group for the year ended 31 December 2020 are set out in the consolidated statement of profit

or loss on pages 74 to 75.

The Directors do not recommend the payment of a dividend in respect of the year ended 31 December 2020.

BUSINESS REVIEWA review of the business of the Group for the year 2020 and a discussion on the Group’s future business

development and the principal risks and uncertainties facing the Group are provided in the Chairman’s Statement,

Management Discussion and Analysis from pages 5 to 21. In addition, the financial risk management objectives and

policies of the Group can be found in note 6 of the Consolidated Financial Statements. An analysis of the Group’s

performance during the year 2020 using financial key performance indicators is provided in the Financial Summary

on page 4.

The Group has complied with the relevant laws and regulations that have significant impact on the operations of

the Group.

The Group recognizes that our employees, customers and business partners are the keys to our sustainable

development. The Group is committed to establishing a close and caring relationship with our employees, providing

quality services to our customers and enhancing cooperation with our business partners.

In addition, details regarding the Group’s performance by reference to environmental and social-related key

performance indicators and policies, as well as relationships with its employees, customers and suppliers during this

financial year, required to be disclosed pursuant to Rule 13.91 of the Listing Rules. For more information, please

refer to the environmental, social and governance report to be issued by the Group. This report will be available for

viewing and downloading from the websites of the Group and Hong Kong Stock Exchange after its publication.

26


Directors’ Report

RESERVESMovements in the reserves of the Group during the year ended 31 December 2020 are set out in the consolidated

statement of profit or loss and other comprehensive income and consolidated statement of changes in equity of the

Group.

DONATIONSCharitable and other donations made by the Group during the year ended 31 December 2020 amounted to HK$Nil

(2019: HK$Nil).

PROPERTY, PLANT AND EQUIPMENTDetails of the movements in property, plant and equipment of the Group are set out in note 18 to the

Consolidated Financial Statements.

SHARE CAPITALParticulars of the share capital of the Company are set out in note 37 to the Consolidated Financial Statements.

DISTRIBUTABLE RESERVESDistributable reserves of the Company as at 31 December 2020 amounted to HK$nil (2019: HK$nil). Under Section

34 of the Companies Law of the Cayman Islands, the reserves are available for distribution to shareholders subject

to the provisions of the articles of association of the Company (the “Articles”) and no distribution shall be paid to

shareholders of the Company (“Shareholders”) out of the reserves unless the Company shall be able to pay its

debts as they fall due in the ordinary course of business of the Group.

DIVIDEND POLICYOur dividend policy is to recommend dividend distribution to shareholders, where circumstances permits, at a

payout ratio of 20% of eligible profits for the year, with the remainder of the profits retained as capital for future

use.

The recommendation of the payment of any dividend is subject to the absolute discretion of the Board, and any

declaration of final dividend will be subject to the approval of the Shareholders. In proposing any dividend payout,

the Board shall also take into account the following factors

— the Group’s operations, earnings, financial condition, cash requirements and availability,

— capital expenditure and future development requirements,

— any restrictions under the Companies Law of the Cayman Islands, the articles of association of the Company

(“Articles of Association”) and the Shareholders, and

— other factors it may deem relevant at such time.

The Dividend Policy will be reviewed from time to time, however, it is not guaranteed that dividend will be

proposed within any period of time.

27


Directors’ Report

FIVE YEARS FINANCIAL SUMMARYA summary of the published results and the assets and liabilities of the Group for each of the last five financial

years is set out on page 4.

PERMITTED INDEMNITY PROVISIONA permitted indemnity provision for the benefit of the Directors is currently in force throughout the financial year.

The Company has taken out and maintained directors’ liability insurance throughout the year, which provides

approximate cover for the Directors of the Group.

PURCHASE, SALE OR REDEMPTION OF SHARESDuring the year ended 31 December 2020, neither the Company nor any of its subsidiaries has purchased or sold

any of its listed securities.

PENSION SCHEMEAccording to the legislation of Hong Kong relating to the Mandatory Provident Fund (“MPF”), with effect from

1 December 2000, the Group is required to participate in the MPF scheme operated by approved trustees in Hong

Kong and to make contributions for its eligible employees. The contributions borne by the Group are calculated at

5% of the salaries and wages (monthly contributions is limited to HK$1,500 for each eligible employee) as

calculated under the MPF legislation.

SHARED-BASED COMPENSATION SCHEMEThe Company operates Share Award Scheme 2016 for the purpose of assisting in recruiting, retaining and

motivating key staff members. Eligible participants of the schemes include the Company’s directors (including

independent non-executive directors) and other employees of the Group.

Share Award Scheme 2016The Company adopted the Share Award Scheme 2016 on 14 June 2016 (“Share Award Scheme 2016”). Subject to

any early termination as may be determined by the Board by a resolution of the Board, Share Award Scheme 2016

shall be valid and effective for a term of 5 years commencing from the date of the Scheme. The Board shall not

make any further award of Awarded Shares which will result in the total number of issued Shares awarded by the

Board under Share Award Scheme 2016 exceeding 10% of the total number of issued Shares from time to time.

No shares were purchased by the trustee of the Share Award Scheme for year ended 31 December 2020. During

the year ended 31 December 2019, the trustee of the Share Award Scheme 2016, pursuant to the terms of the

rules and trust deed of the Share Award Scheme 2016, purchased on the Stock Exchange a total of 12,440,000

shares for total consideration of approximately HK$2,976,000. During the year ended 31 December 2018, the

trustee of the Share Award Scheme 2016, pursuant to the terms of the rules and trust deed of the Share Award

Scheme 2016, purchased on the Stock Exchange a total of 1,170,000 shares for total consideration of

approximately HK$395,000. Hence, the total no. of shares in the Share Award Scheme as at 31 December 2020

was 13,610,000.

No share was awarded to any director or employee of the Company under the Share Award Scheme during the

year.

28


Directors’ Report

DIRECTORSThe Directors during the year 2020 were:

Executive Directors:Mr. Chan Nap Kee, Joseph (Chairman)

Mr. Yang Yongcheng (Compliance Officer)

Independent Non-Executive Directors:Mr. Liew Swee Yean

Dr. Wong Yun Kuen



According to Article 86 of the articles of association of the Company (“the Articles”), the directors shall have the

power from time to time and at any time to appoint any person as a director to fill a casual vacancy on the Board

or, as an addition to the existing Board provided that the number of directors so appointed by the Board shall not

exceed any maximum number determined from time to time by the Shareholders in general meeting. Any director

so appointed by the Board shall hold office only until the next following general meeting of the Company (in the

case of filling a casual vacancy) or until the following annual general meeting of the Company (“AGM”) (in the

case of an addition to the Board), and shall then be eligible for re-election at that meeting.

During the year 2020, in accordance with Article 86 of the Articles, no director will retire from office and shall then

be eligible for re-election at that meeting.

According to Article 87 of the Articles, one-third of the directors for the time being (or, if the number of directors

is not three (3) or a multiple of three (3), the number nearest to but not less than one-third), shall retire at each

AGM by rotation, provided that every director shall be subject to retirement by rotation at least once every three

(3) years. The retiring directors shall then be eligible for re-election at the AGM.

In accordance with Article 87 of the Articles, Mr. Yang Yongcheng and Mr. Anderson Brian Ralph will retire from

offices by rotation at the forthcoming AGM, and being eligible, offer themselves for re-election at the forthcoming

AGM.

According to Code provisions A.4.3 of Appendix 15 Corporate Governance Code and Corporate Governance Report

of the Rules Governing the Listing of Securities on the GEM of Stock Exchange (the “GEM Listing Rules”), if an

independent non-executive director serves more than 9 years, his further appointment should be subject to a

separate resolution to be approved by shareholders.

29


Directors’ Report

As Mr. Liew Swee Yean, Dr. Wong Yun Kuen and Mr. Anderson Brian Ralph served for more than 9 years in year

2021, accordingly, their further appointments in 2021 should be subject to separate resolutions to be approved by

shareholders, which were attained by way of re-election at the AGM. Mr. Liew Swee Yean, Dr. Wong Yun Kuen

and Mr. Anderson Brian Ralph offered themselves for re-election at the AGM. Mr. Siu Siu Ling, Robert retired as

independent non-executive director of the Company at the Annual General Meeting of the Company held on

30 December 2020.

The Company has received from each of Mr. Liew Swee Yean, Dr. Wong Yun Kuen and Mr. Anderson Brian Ralph,

being the independent non-executive directors, annual confirmations of their independence pursuant to Rule 5.09 of

the GEM Listing Rules and the Company still considers each of the independent non-executive directors to be

independent.

DIRECTORS’ SERVICE CONTRACTSThe term of office for each of Mr. Liew Swee Yean, Mr. Siu Siu Ling Robert, Dr. Wong Yun Kuen and

Mr. Anderson Brian Ralph, being the independent non-executive directors, is for a term of one year and may be

extended for such period as agreed in writing by the directors concerned and the Company. Currently, Mr. Liew

Swee Yean has been appointed as an independent non-executive director up to 7 November 2021, Dr. Wong Yun

Kuen has been appointed as an independent non-executive director up to 29 September 2021, Mr. Anderson Brian

Ralph has been appointed as an independent non-executive director up to 22 January 2022.

Save as disclosed above, none of the directors has a service contract with the Company which is not determinable

within one year without payment of compensation, other than statutory compensation.

Details of the directors’ emoluments are set out in note 14 to the Consolidated Financial Statements.

DIRECTORS’ REMUNERATIONIt is proposed that the Board be authorised to fix the directors’ remuneration at the forthcoming AGM. The

remuneration, including any bonus payments, housing allowance and share award, to be paid to the directors, are

recommended by the remuneration committee of the Board (“Remuneration Committee”) with reference to the

directors’ duties, responsibilities and performance and the results of the Group.

DIRECTORS’ INTEREST IN CONTRACTSThere were no contracts of significance in relation to the Group’s business to which the Company, its subsidiaries

or its holding company was a party and in which a director had a material interest, whether directly or indirectly,

subsisting as at the end of the year or at any time during the year 2020 under review.

30


Directors’ Report

DIRECTORS’ INTEREST IN THE SHARES OF THE COMPANYThe interest of the directors in the Shares of the Company were as follow:

Name of Directors Capacity

Number of shares as

at 31 December 2020

Approximate

percentage of the

total issued Shares as

at 31 December 2020

Chan Nap Kee, Joseph Beneficial owner 167,263,298 (Note 1) 29.01%

Yang Yongcheng Beneficial owner 1,675,000 (Note 2) 0.29%

Wong Yun Kuen Beneficial owner 525,000 (Note 3) 0.09%

Liew Swee Yean Beneficial owner 204,000 (Note 3) 0.04%

Siu Siu Ling, Robert Beneficial owner 204,000 (Note 3) 0.04%

Anderson Brian Ralph Beneficial owner 150,000 (Note 3) 0.03%

Chen Chun Long Beneficial owner 6,147,000 (Note 4) 1.07%

Ching Ho Tung, Philip Beneficial owner 220,000 (Note 4) 0.04%

Save as disclosed above, as at 31 December 2020, none of the directors or chief executive of the Company had any

interest or short position in any Shares, underlying Shares and debentures of the Company or any of its associated

corporations (as defined in Part XV of the Ordinance) which is required to be notified to the Company and the

Stock Exchange pursuant to divisions 7 and 8 of Part XV of the SFO (including interests and short positions which

they were taken or deemed to have under such provisions of the SFO), or any interests required to be entered in

the register maintained in accordance with Section 352 of the SFO, or as otherwise required to be notified to the

Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities

transactions by directors.

Notes:

1. After allotment of rights shares on 16 January 2017 and share consolidation of 10 shares into 1 share became effective on 16 February 2017,

the total number of shares beneficially owned by Mr. Chan Nap Kee, Joseph (“Mr. Chan”) was 160,212,298. Of these, 2,004,000 shares

were shares awarded to Mr. Chan as Director on 30 December 2015 under the Share Award Scheme adopted since 10 May 2013. In

addition, 2,750,000 shares were purchased by Mr. Chan Nap Kee, Joseph on the market from 29 March to 31 December 2017. Hence total

number of shares owned by Mr. Chan was 161,882,298 as at 31 December 2017.

On 22 March 2018, 3,081,000 shares were shares awarded to Mr. Chan as Director under the Share Award Scheme 2016. Hence, the total

no. of shares owned by Mr. Chan was 164,963,298. In addition, 1,490,000 shares were purchased by Mr. Chan on the market from 29 June

2018 to 31 December 2018. Hence the total number of shares owned by Mr. Chan was 166,453,298 as at 31 December 2018.

During the year ended 31 December 2019, 810,000 shares were purchased by Mr. Chan on the market. Hence the total number of shares

owned by Mr. Chan was 167,263, 298 as at 31 December 2019 and 2020.

31


Directors’ Report

2. Of these, 400,000 shares were shares awarded to Mr. Yang Yongcheng (“Mr. Yang”) as Director on 30 December 2015 under the Share Award

Scheme 2013. On 22 March 2018, 1.000,000 shares were shares awarded to Mr. Yang as Director under the Share Award Scheme 2016. In

addition, 60,000 shares were purchased by Mr. Yang on the market from 12 November 2018 to 31 December 2018. Hence, the total no. of

shares owned by Mr. Yang was 1,675,000.

3. Of these, 150,000 shares were shares awarded to each of Mr. Liew Swee Yean, Mr. Siu Siu Ling, Robert and Mr. Anderson Brian Ralph as

Director on 30 December 2015 under the Share Award Scheme 2013.

4. These were shares held by Mr. Chen Chun Long and Mr. Ching Ho Tung as at 19 June 2019 when they were appointed as joint Chief Executive

Officers of the Company.

INTEREST OF SUBSTANTIAL SHAREHOLDERS IN SHARES OF THE COMPANYAs at 31 December 2020, so far as is known to the Directors of the Company, the persons who had an interest in

the shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2

and 3 of Part XV of the SFO were as follows:

Name of Shareholders

Capacity and

nature of interest

Number of shares as

at 31 December 2020

Approximate

percentage of the

total issued shares as

at 31 December 2020

Mr. Chan Nap Kee, Joseph Beneficial Owner 167,263,298 29.01%

Ms. Yeung Po Yee, Bonita Interest of spouse (Note 1) 167,263,298 29.01%

Mr. Zhang Xiongfeng Beneficial Owner 81,950,000 14.21%

Ms. Wu Mingqin Interest of spouse (Note 2) 81,950,000 14.21%

Notes:

1. These were total number of Shares that Mr. Chan Nap Kee, Joseph (“Mr. Chan”) beneficially owned. As the spouse of Mr. Chan, Ms. Yeung

Po Yee, Bonita, was taken to be interested in the Shares in which Mr. Chan was interested by virtue of the SFO.

2. These were total number of Shares that Mr. Zhang Xiongfeng (“Mr. Zhang”) beneficially owned. As the spouse of Mr. Zhang, Ms. Wu Mingqin,

was taken to be interested in the Shares in which Mr. Zhang was interested by virtue of the SFO.

Save as disclosed above, the Directors were not aware of any other person (other than the directors and the chief

executives of the Company) who, as at 31 December 2020, had, or was deemed to have, interests or short

positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock

Exchange under provisions of Divisions 2 & 3 of Part XV of the SFO.

32


Directors’ Report

CONTINUING CONNECTED TRANSACTIONSAgreement for Supply of Coal for three yearsOn 30 November 2017, Shandong Kailai entered into the Master Coal Supply Agreement with Yihe and Zaozhuang

Bayi in relation to the supply of coal by Shandong Kailai to Yihe for a term of three years commencing from

1 January 2018 to 31 December 2020 (both dates inclusive). It is expected that the transaction amount for the

transactions under the Master Coal Supply Agreement for the three years ending 31 December 2020 will not

exceed the annual caps of HK$414 million, HK$448.5 million and HK$448.5 million, respectively. There was no

transaction under the Master Coal Supply Agreement for the year ended 31 December 2020 and 2019.

As (i) Shandong Bayi is a substantial shareholder of Shandong Kailai, an indirect non-wholly owned subsidiary of the

Company; (ii) Shandong Bayi is wholly owned by Yihe; and (iii) Zaozhuang Bayi is owned as to 75% by Shandong

Bayi, each of Yihe and Zaozhuang Bayi is a connected person of the Company at the subsidiary level. As such, the

transactions under the Master Coal Supply Agreement constitute continuing connected transactions of the Company

under Chapter 20 of the GEM Listing Rules.

Master Coal Supply AgreementDate and partiesDate: 30 November 2017

Parties: (1) Shandong Kailai, as supplier;

(2) Yihe, as purchaser; and

(3) Zaozhuang Bayi, as receiver.

Principal terms of the Master Coal Supply AgreementDuring the term of the Master Coal Supply Agreement, it is agreed that Yihe shall purchase not less than 50,000

tonnes of coal from Shandong Kailai each month which shall be delivered by Shandong Kailai to the location as

designated by Zaozhuang Bayi (which is owned as to 75% by Shandong Bayi) at the cost of Shandong Kailai.

Pursuant to the Master Coal Supply Agreement, the coal to be supplied thereunder shall be for generating

electricity.

Under the Master Coal Supply Agreement, the sale price of coal shall be determined by both parties after arm’s

length negotiations based on the prevailing market price, provided that, in any event, the terms and conditions for

the supply of coal by Shandong Kailai to Yihe (including the sale price of each unit of coal) shall be no less

favourable as those between the Group and its other coal purchasers who are Independent Third Parties (the

“Independent Purchasers”). In the event that sale price offered by other supplier(s) of coal of Yihe which is/are

Independent Third Parties for comparable quantities and specifications of coal are the same as those of Shandong

Kailai, Shandong Kailai shall have the priority to supply the coal to Yihe for purchase. Under the Master Coal

Supply Agreement, there is no exclusivity commitment restricting the Group from supplying coal to Independent

Purchasers.

33


Directors’ Report

In order to assess whether the sale price of coal under the Master Coal Supply Agreement is fair and reasonable

and no less favourable than that between the Group and the Independent Purchasers, the Group would consider

the following factors before supplying coal to Yihe under the Master Coal Supply Agreement:

1. the national industrial policy as well as industry and market conditions in the PRC;

2. the specified guidelines issued by the National Development and Reform Commission of China setting out the

coal purchase prices (if any);

3. the current coal transaction price in local coal exchange centre and market in the PRC;

4. the quality of the coal (including the estimated calorific value of coal as required by different power generating

unit);

5. the quantity of coal;

6. the estimated transportation fees based on the distance between the relevant coal mines and the delivery

location as designated by Zaozhuang Bayi; and

7. the market unit price of coal with comparable quality and quantity supplied by the Group to the Independent

Purchasers.

The Directors (including the independent non-executive Directors) consider that the above methods and procedures

can ensure that the transactions contemplated under the Master Coal Supply Agreement will be conducted on

normal commercial terms and no less favourable than those available from Independent Purchasers and in the

interest of the Company and its shareholders as a whole.

Yihe will settle the purchase of coal from Shandong Kailai on a monthly basis based on the actual quantity of coal

purchased.

The Master Coal Supply Agreement shall have a term of three years commencing from 1 January 2018 to

31 December 2020 (both dates inclusive).

For further details, please refer to the Company’s announcement dated 30 November 2017.

MANAGEMENT CONTRACTSNo contracts concerning the management and administration of the whole or any substantial part of the business

of the Company were entered into or existed during the year 2020 under review.

34


Directors’ Report

MAJOR CUSTOMERS AND SUPPLIERSThe percentages of cost of sales and sales for the year 2020 attributable to the Group’s major suppliers and

customers are as follows:

Cost of sales

— the largest supplier 19%

— five largest suppliers combined 46%

Sales

— the largest customer 16%

— five largest customers combined 47%

None of the Directors, their associates or any shareholder (which to the knowledge of the Directors owns more

than 5% of the Company’s share capital) had an interest in the major suppliers or customers mentioned above.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICESThe Company has complied with most of the code provisions as set out in the Code of Corporate Governance

Practices contained in Appendix 15 to the GEM Listing Rules during the year ended 31 December 2020. Details of

compliance and deviation are set out in the Corporate Governance Report on pages 36 to 63.

DIRECTORS’ INTEREST IN COMPETING BUSINESSNone of the directors or their respective associates (as defined in GEM Listing Rules) had any interests in any

business which compete or may compete with the Group or any other conflicts of interest with the Group.

PRE-EMPTIVE RIGHTSThere is no provision for pre-emptive rights under the Articles and there are no restrictions against such rights

under the laws in the Cayman Islands.

SUBSIDIARIESParticulars of the Company’s subsidiaries are set out in note 41 to the Consolidated Financial Statements.

SUFFICIENCY OF PUBLIC FLOATBased on the information that is publicly available to the Company and within the knowledge of the directors as at

the latest practicable date prior to the issue of this annual report, the Company has maintained a sufficient public

float in accordance with the GEM Listing Rules.

EVENTS AFTER THE REPORTING PERIODEvents after the reporting period are set out in note 47 to the Consolidated Financial Statements.

35


Directors’ Report

AUDITORAt the Company’s last Annual General Meeting, RSM Hong Kong was re-appointed as auditor of the Company.

RSM Hong Kong retires, and, being eligible, offer themselves for re-appointment. A resolution for re-appointment of

RSM Hong Kong will be put at the forthcoming Annual General Meeting.

For and on behalf of the Board

Chan Nap Kee, Joseph

Chairman

Hong Kong, 22 March 2021

36


Corporate Governance Report

OUR GOVERNANCE FRAMEWORKKaisun operates with a clear and effective governance structure

Audit Committee

THE BOARDLeadership, Risk Management and

Internal Control

Nomination andCorporate Governance

CommitteeRemuneration

Committee

Executive Director IndependentNon-Executive Director

37



THE BOARD

Oversees overall governance, financial performance and development of the Group, collectively responsible for long-term success of the Group

Leadership: provides leadership and direction for the business of the Group.

Risk Management and Internal Control: ensures only acceptable risks are taken

Audit Committee

• Oversees financial reporting process

• Reviews internal control and risk management system

Nomination and Corporate Governance Committee

• Recommends Board appointment

• Reviews Group’s practices on corporate governance

Remuneration Committee

• Sets remuneration policy for executive directors

• Determines executive director’s remuneration and incentives

38



Remuneration Committee

ReportPage 45

Nomination and Corporate Governance

Committee

Page 46 to Page 50

Further informationKaisun’s governance framework serves as a guide for the Board, Joint Chief

Executive Officers and management in the performance and fulfillment of

their respective obligations to Kaisun and its stakeholders. The key

components of Kaisun’s governance framework, including guidelines, policies

and procedures ensures

(i) the existence of a capable and qualified Board with diverse backgrounds

and skills;

(ii) the establishment of appropriate roles for the Board and various

committees; and

(iii) a collaborative and constructive relationship between the Board, Joint

Chief Executive Officers and the management.

The following constitutes key components of Kaisun’s governance

framework. They are posted on the Company’s website: www.kaisun.hk

• List of Director and their Role and Function

• Terms of References of the various corporate governance related Board

Committees

• Articles of Association

• Memorandum of Association.

The Board also regularly assesses and enhances its governance framework,

practices and principles in light of regulatory regimes as well as Company

needs.

Audit Committee

Report

Page 51 to Page 52

Risk Management and

Internal Control Report

Page 53

39



Appointment of Joint chief executive officers (CEOs)As part of the Group’s long term management succession plan which promote our professional and younger

members of the Company that facilitates better business development of the Company, and to implement the

aspect of good corporate governance of the Company where the role Chairman and Chief Executive Officer should

be separated and should not be performed by the same individual, Mr. Chen Chun Long and Mr. Ching Ho Tung,

Philip were appointed as joint Chief Executive Officers (CEOs) of the Company with effect from 19 June 2019. The

Company is better prepared for future strategic growth of the Group with above changes.

Following the appointment of above joint Chief Executive Officers, Mr. Joseph Chan Nap Kee relinquished as Chief

Executive Officer, and remains as Chairman and Executive Director of the Company.

For details on appointment of Joint CEOs, please refer to the Company’s announcement dated 18 June 2019.

Role and Function of the BoardBeing collectively responsible for long-term success of the Group, the Board provides leadership and direction for

the business of the Group and establishes a risk management and internal control system for proper management

of the Group. The daily operational matters of the Group are delegated by the Board to Joint Chief Executive

Officers and the management.

Appointment of four independent Directors with a diverse backgroundThe Board is structured to ensure it is of a high caliber and has a balance of skills, experience and diversity of

perspectives desirable for effective leadership of the Group.

Regarding board composition, in view of good corporate governance, we are one of the few listed companies in

Hong Kong where we have more Independent non-executive Directors than Executive Directors. As at 29 December

2020, the Board comprised six Directors: two Executive Directors and four Independent non-executive Directors

(INEDs).

INEDs comprise two-third of the Board which exceeds the Listing Rules requirement that INEDs shall represent at

least one-third of the Board. The rationale behind such appointment is that the Company should be monitored by

independent non-executive Directors on behalf of public shareholders.

40



In 2020, four Independent Non-executive Directors drawn from diverse and complementary backgrounds spanning

mining, accounting and legal professional. They bring valuable experience and insight in the following areas of

experience and expertise, driving the corporate strategy and growth of the Group:

EXPERTISE/EXPERIENCE NAME OF DIRECTORS

EXPERTISE AND EXPERIENCE IN MINING FIELDPast experience as a senior executive in a major mining company

Expertise as a geological expert Dr. Wong Yun Kuen


Note: Director’s full biography are set out from pages 22 to 24

AUDIT COMMITTEEACCOUNTING EXPERTISE

Expertise on “Audit Committee Accounting

Expertise” under the Listing Rules

LEGAL EXPERTISE

Legal expertise for advising general

management for business

MACRO-ENVIRONMENT AFFECTING THE GROUP

Expertise in the economic, political

social environment affecting the Group

and its operation

Mr. Anderson Brian RalphDr. Wong Yun Kuen

Mr. Liew Swee Yean

Mr. Siu Siu Ling, Robert

41



HOW THE BOARD, JOINT CEOs AND MANAGEMENT WORKS TOGETHERThrough respecting each other’s role, the Board, Joint CEOs and management are supportive of the development

and maintenance of a healthy corporate governance culture.

For the day-to-day operation of the business, the Board relies on Joint CEOs and management. The Board monitors

what Joint CEOs and management are doing. In terms of strategy formulation, the Board works closely with Joint

CEOs and management in thinking through the Group’s direction and long-term plans, as well as the various

opportunities and risks associated therewith and that are facing the Group generally.

With wide range of experiences, specific expertise, and fresh objective perspectives, the Independent Non-Executive

Directors provide independent challenge and review. As members of the various Board committees, they also

undertake governance work with a particular focus as noted under the respective terms of reference of the various

Board committees.

Highlights of key features at Kaisun Board during 2020

The Board held 15 meetings. Kaisun Directors have a strong commitment to the Company, reflected by the high attendance record at the Board and Committee meetings.

Financial plans including budgets were discussed at Board meetings. Reports covering financial highlights to Executive Directors and the Independent Non-executive Directors (INEDs) were issued.

42



To supplement the formal Board meetings and to further strengthen the independence of INEDs and to enable them to discuss more freely, INEDs held 6 separate discussion sessions during 2020 without the presence ofExecutive Directors

INEDs were invited to Company’s events, such as the Greater Bay Area Conference

43



THE BOARD OF DIRECTORSComposition of the BoardAs at 29 December 2020, the Board comprised six directors, including two executive directors, namely Mr. Chan

Nap Kee, Joseph and Mr. Yang Yongcheng and four independent non-executive directors, namely Mr. Liew Swee

Yean, Mr. Siu Siu Ling, Robert, Dr. Wong Yun Kuen and Mr. Anderson Brian Ralph. Mr. Chan Nap Kee, Joseph is

the Chairman of the Board. Mr. Yang Yongcheng is the Compliance Officer.

One of the independent non-executive directors has appropriate professional qualification, or accounting

qualifications and related financial management expertise. Biographical details of the directors are set out on pages

22 to 24 of this annual report.

Each of the independent non-executive directors has entered into a service contract with the Company for a term

of one year, which may be extended for such period as agreed in writing between the director concerned and the

Company.

There is no financial, business, family or other material or relevant relationship among the directors.

Independent Non-Executive DirectorsThe Company has received annual confirmations of their independence from each of its independent non-executive

directors pursuant to Rule 5.09 of the GEM Listing Rules. The Company is of the view that all the independent

non-executive directors meet the independence guidelines as set out in Rule 5.09 of the GEM Listing Rules and still

considers that they are independent.

Chairman and Joint Chief Executive OfficersAs part of the Group’s long term management succession plan which promote our professional and young

members of the Company that facilitates better business development of the Company, and to implement the

aspect of good corporate governance of the Company where the role of Chairman and Chief Executive Officer

should be separated and should not be performed by the same individual. Hence, Mr. Chen Chun Long and Mr.

Ching Ho Tung, Philip were appointed as joint Chief Executive Officers (CEOs) of the Company with effect from 19

June 2019. The Company is better prepared for future strategic growth of the Group with above changes.

Following the appointment of above joint Chief Executive Officers, Mr. Chan Nap Kee, Joseph relinquished as Chief

Executive Officer, and remains as Chairman and Executive Director of the Company.

For details on appointment of Joint CEOs, please refer to the Company’s announcement dated 18 June 2019.

Board MeetingsFifteen regular Board meetings were held during the year ended 31 December 2020. The Board meetings involved

the active participation of the directors either in person or by telephone or through other electronic means of

communication.

At least 14 days notice has been given to all directors of each of the Board meetings.

44



Attendance of each of the directors at Board meetings during the year ended 31 December 2020 is set out as

follows:

Number of Board Meetings 15

Executive Directors:

Mr. Chan Nap Kee, Joseph (Chairman) 15/15 100%

Mr. Yang Yongcheng 15/15 100%

Independent Non-Executive Directors:

Mr. Liew Swee Yean 15/15 100%

Dr. Wong Yun Kuen 15/15 100%

Mr. Anderson Brian Ralph 15/15 100%

Mr. Siu Siu Ling, Robert (retired on 30 December 2020) 15/15 100%

Average attendance rate 100%

Annual General MeetingExcept for Mr. Yang Yongcheng, all other five Directors attended the Annual General Meeting held on 30

December 2020.

Company SecretariesAs stated in the Company’s announcement dated 31 August 2020, Mr. Wong Lok Man was appointed as Group

Financial Controller, Joint Company Secretary and Authorized Representative. Mr. Yun Hon Man resigned as Joint

Company Secretary, Authorized Representative and Group Chief Accountant with effect from 31 August 2020.

All Directors have access to the advices and services from the Joint Company Secretaries, Miss Young Helen (“Miss

Young”), Mr. Wong Lok Man (“Mr. Wong”) and Mr. Yun Hon Man (“Mr. Yun”). Miss Young, Mr. Wong and Mr.

Yun have confirmed that they have taken no less than 15 hours of the relevant professional training for the year

ended 31 December 2020 in compliance with Rule 5.15 of the GEM Listing Rules.

BOARD COMMITTEESThe Board has established the following three committees with written terms of reference (available on the

Company’s corporate website www.kaisun.hk under “Investor Relations” section with heading of “Corporate

Governance), which are in line with the Corporate Governance (“CG Code”):

• Remuneration Committee

• Nomination and Corporate Governance Committee

• Audit Committee

All the committees comprise a majority of Independent Non-executive Directors. All Committees are chaired by

Independent Non-executive Directors.

45



REMUNERATION COMMITTEE REPORTComposition of the Remuneration Committee

Committee Chairman Dr. Wong Yun Kuen*

Members Mr. Anderson Brian Ralph*

Mr. Chan Nap Kee, Joseph◆

* Independent Non-executive Director◆ Executive Director

Role and Function of the Remuneration CommitteeThe primary duties of the Remuneration Committee is to determine, with delegated responsibility, the remuneration

packages of individual executive directors and senior management.

Remuneration PolicyThe formulation of the Group’s remuneration strategy and policy is based on the principles of equity and market

competitiveness so as to drive staff to work towards the mission of the Group and to retain talents. As a long-term

incentive plan and with the aim at motivating directors and employees in the continued pursuit of the Company’s

goal and objectives, the Company has adopted share award scheme under which the Company may award

Company’s shares purchased or shares allotted and issued by the Company to the directors/employees of the

Company as award.

Remuneration Committee MeetingsThe Remuneration Committee held one meeting during the year ended 31 December 2020. During the meeting,

the Remuneration Committee had reviewed and approved the increment in salary, bonus payment and share award

for the executive directors and the senior management by way of resolutions passed by all committee members.

However, the executive directors did not participate in determining their own remuneration.

Attendance of each of the directors at the Remuneration Committee meetings for the year ended 31 December

2020 is set out as follows:

Number of Remuneration Committee Meetings 1

Dr. Wong Yun Kuen (Committee Chairman) 1/1 100%

Mr. Chan Nap Kee, Joseph 1/1 100%



46



NOMINATION AND CORPORATE GOVERNANCE COMMITTEE REPORTComposition of the Nomination and Corporate Governance Committee (“NC”)

Committee Chairman Mr. Anderson Brian Ralph* (appointed on 30 December 2020)

Mr. Siu Siu Ling, Robert* (retired on 30 December 2020)

Members Mr. Liew Swee Yean*

Mr. Chan Nap Kee, Joseph◆

* Independent Non-executive Director◆ Executive Director

Role and Function of NCThe primary duties of the NC is to make recommendations to the Board on appointment or reappointment of

Directors, and to develop and review Group’s policies and practices on corporate governance and to make

recommendations to the Board.

Appointment of Mr. Anderson Brian Ralph as Chairman of NCFollowing the retirement of Mr. Siu Siu Ling, Robert as independent non-executive director and Chairman of NC of

the Company at the annual general meeting of the Company held on 30 December 2020 (“AGM”), Mr. Anderson

Brian Ralph was appointed by the Board as the chairman of NC of the Company with effect from the conclusion of

the AGM.

For details of the appointment of Chairman of NC, please refer to the Company’s announcement dated 30

December 2020.

47



BOARD DIVERSITYThe Company recognises and embraces the benefits of having a diverse Board. A Board Diversity Policy has been

adopted by the Board. In reviewing Board composition, NC will consider the benefits of all aspects of diversity

including, but not limited to, skills, regional and industry experience, background, race, age, culture and gender, so

as to maintain an appropriate range and balance of skills, experience and background on the Board. An analysis of

the Board’s current composition is set out in the accompanying charts.

In identify ing suitable candidates, the

Nomination Committee will consider candidates

on merit against objective criteria and with due

regard for the benefits of diversity on the

Board.

DESIGNATION

IndependentNon-executiveDirectors – 4

ExecutiveDirectors – 2

48



Chinese (PRC) – 1

European – 1

Chinese(Hong Kong) – 4

ETHNICITY Based on the latest review, the

Nomination Committee considers the

Board to be diverse in respect of the

aforesaid evaluation cr iter ia. The

Nomination Committee has decided not

to set any measurable objectives for

implementing the Board Diversity Policy.

The NC will continue to ensure that diversity is

taken into consideration when assessing Board

composition.

GENDER

Male – 6

49



72-77years old – 1

61-65 years old – 1


45-50years old – 1


AGE GROUP With regard to the Directors’ skills, regional

and industry experience as wel l as

background , p l ease re fe r to the i r

biographical details set out in the Biography

of Directors and Senior Management section

on pages 22 to 24.

18-20 years – 1

13-17 years – 211-12 years – 3

LENGTH OF SERVICE ON BOARD

50



DIRECTORSHIP WITH OTHER PUBLIC LISTED COMPANIES(NO. OF COMPANIES)

2 Other listedcompanies – 2 Directors

No other listedcompanies – 4 Directors

1 Other listedcompany – 1 Director

Attendance of each of the directors at the NC meetings for the year ended 31 December 2020 is set out as

follows:

Number of Nomination and Corporate Governance Committee Meeting 1

Mr. Anderson Brian Ralph (Committee Chairman since 30 December 2020) 1/1 100%

Mr. Siu Siu Ling Robert (Committee Chairman retired on 30 December 2020) 1/1 100%

Mr. Liew Swee Yean 1/1 100%

Mr. Chan Nap Kee, Joseph 1/1 100%


AUDITORS’ REMUNERATIONFor the year ended 31 December 2020, the fee paid or payable to external auditors in respect of audit services

amounted to HK$2.8 million.

PREPARATION OF ACCOUNTSThe Directors are responsible for overseeing the preparation of the annual accounts which give a true and fair view

of the Group’s state of affairs, results and cash flows for the year 2020 under review. In preparing the accounts for

the year ended 31 December 2020, the directors have approved adoption of all the applicable standards and

interpretations of International Financial Reporting Standards (“IFRSs”).

The quarterly, interim and annual results of the Company are announced in a timely manner after the end of the

relevant periods.

51



AUDIT COMMITTEE REPORTComposition of the Audit Committee (“AC”)

Committee Chairman Mr. Liew Swee Yean*

Members Dr. Wong Yun Kuen*

Mr. Siu Siu Ling Robert* (retired on 30 December 2020)

Mr. Anderson Brian Ralph*

* Independent Non-executive Director

Role and Function of the ACThe primary duties of the AC are to review and supervise the financial reporting process and internal control system

of the Group and build an important bridge between the Board and the Company’s auditors on those matters

within the scope of the Group’s audit. It also reviews the effectiveness of the external and internal audit and

conducts risk evaluation.

The AC is provided with sufficient resources to discharge its responsibilities and is supported by the Finance

Department of the Company. The AC is accountable to the Board.

Audit Committee MeetingsDuring the year ended 31 December 2020, the AC had held six meetings to review and supervise the financial

reporting process and the AC had reviewed the quarterly, interim and annual results, internal controls and risk

management systems. The AC was of the opinion that the preparation of such results complied with the applicable

accounting standards and requirements and that adequate disclosures have been made. The AC also carried out and

discharged its other duties as set out in the CG Code.

Attendance of each of the independent non-executive directors at the AC meetings during the year ended 31

December 2020 was set out as follows:

Number of Audit Committee Meetings 6

Mr. Liew Swee Yean (Committee Chairman) 6/6 100%

Mr. Siu Siu Ling, Robert (retired on 30 December 2020) 6/6 100%

Dr. Wong Yun Kuen 6/6 100%



52



During the year 2020, the AC had undertaken the following duties:

(i) made recommendations to the Board on the appointment, reappointment or removal of the external auditors

(the “Auditors”) and approved the audit fees and terms of engagement of the Auditors, or any questions of

resignation or dismissal of the Auditors;

(ii) reviewed the quarterly, interim and annual financial statements prior to recommending them to the Board for

approval;

(iii) reviewed the Auditors’ management letter and the management’s response thereto, and to ensure that

recommendations made by the Auditors are carried out;

(iv) reviewed the operation and effectiveness of the Company’s financial control, internal control and risk

management systems;

(v) reviewed the appropriateness of reporting and accounting policies and disclosure practices; and

(vi) reviewed the work of the Internal Audit Department, ensuring coordination between the Internal Audit

Department and the Auditors, and reviewing and monitoring the effectiveness of the internal audit function.

During the year 2020, the Board, through the AC, reviewed the effectiveness of the Group’s system of internal

control over financial, operational and compliance issues, broad-based risk management processes, and physical and

information systems security. To formalize the annual review of internal control system, the AC made reference to

the globally recognised framework with modifications to include some controls which are specific to the Group’s

operation. The AC concluded that, in general, the Group has set up a sound control environment and installed

necessary control mechanisms to monitor and correct noncompliance.

The Board, through the review of the AC, was satisfied that the Group had fully complied with the Code Provisions

on internal controls as set forth in the CG Code for the year 2020.

The Group’s financial statements for the year ended 31 December 2020 has been reviewed by the AC, who is of

the opinion that such statements comply with applicable accounting standard and legal requirements, and that

adequate disclosures have been made.

53



CODE ON CORPORATE GOVERNANCE PRACTICESThe Board is committed to maintain good standard of corporate governance practices and procedures. Details of

internal control system are stated under “RISK MANAGEMENT AND INTERNAL CONTROL REVIEW REPORT” on page

53 of this Annual Report. The Company has complied with the code provisions set out in the Corporate

Governance Code (the “CG code”) contained in Appendix 15 to the GEM Listing Rules throughout the year 2020

under review.

CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS BY DIRECTORSThe Company has adopted a code of conduct regarding securities transactions by directors (“Directors”) of the

Company on terms no less exacting than the required standard of dealings as set out in Rules 5.48 to 5.67 of the

GEM Listing Rules throughout the year 2020. The Company has also made specific enquiry of all directors and the

Company was not aware of any non-compliance with the required standard of dealings and its code of conduct

regarding securities transactions by directors.

RISK MANAGEMENT AND INTERNAL CONTROL REPORTThe Board has overall responsibility for the risk management and internal control systems of the Company and for

reviewing their effectiveness. The risk management and internal control systems of the Company are designed to

manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and

not absolute assurance against material misstatement or loss.

The Company has an Internal Audit Function, and Risk Management and Internal Control System are reviewed

throughout the year 2020 and any findings in this regard will be reported to the Audit Committee on a quarterly

basis. Our Internal Auditor has performed the Internal Audit Function of the Company throughout the Period.

REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL EFFECTIVENESSThe Board had conducted an annual review of the effectiveness of the Group’s risk management and internal

control systems for the year ended 31 December 2020, covering the material financial, operational and compliance

controls, and considered that the Group’s risk management and internal control systems are effective and adequate.

The Audit Committee had also annually reviewed the adequacy of resources, qualifications, experience and training

programs of the Group’s internal audit staff and accounting and financial reporting staff and because most of our

accounting staff have professional qualifications with audit and financial experience as well, the Audit Committee

considered that the staffing is adequate and the staffs are competent to carry out their roles and responsibilities.

INVESTOR RELATIONS AND COMMUNICATIONThe Company pursues a policy of promoting transparency in corporate communication and investor relations. Our

communication programmes include participation in investor conferences, conducting road shows, arranging

company visits and ad hoc meetings with potential shareholders.

54



The Company’s website “www.kaisun.hk” is one of the channels to promote effective corporate communication

with the investors and the general public. The website is used to disseminate company announcements, shareholder

information and other relevant financial and non-financial information in an electronic format on a timely basis.

Annual General Meeting (“AGM”)AGM provides an opportunity for communication between the Board and the shareholders of the Company. All

shareholders have proper notice of the AGM at which Directors and chairman or members of the committees are

available to take shareholders’ questions.

The most recent AGM of the Company was held at 11/F, 46 Lyndhurst Terrace, Central Hong Kong on 30

December 2020 at 9.30 a.m. The notice of AGM, the Company’s annual report and the circular containing

information on the proposed resolutions were sent to shareholders at least 20 clear business days prior to the

meeting. Separate resolutions were proposed in respect of each separate issue.

Members of the Audit Committee, Remuneration Committee and Nomination Committee were available to answer

questions from shareholders. A representative of the external auditor also attended the AGM to answer questions

about the conduct of the audit, the preparation and content of the auditor’s report, the accounting policies and

auditor independence.

At the AGM, all resolutions as set out in the notice were put to vote by way of poll by the shareholders. An

explanation was provided of the detailed procedures for conducting a poll. Computershare Hong Kong Investor

Services Limited, the share registrar of the Company in Hong Kong, was appointed as scrutineer for the purpose of

vote-taking at the AGM.

CONTINUOUS PROFESSIONAL DEVELOPMENT FOR DIRECTORS, SENIOR MANAGEMENT AND STAFFThe Directors, senior management and staff are regularly briefed on the amendments to or updates on the relevant

laws, rules and regulations. In addition, the Company has been encouraging the Directors, senior management and

staff to enroll in a wide range of professional development courses and seminars organised by professional bodies

in Hong Kong so that they can continuously update and further improve their relevant knowledge and skills.

www.kaisun.hk

55



The current Directors received the following trainings during the year ended 31 December 2020:

Name and

title of director Updates on Laws, Rules and others Training provider Time spent

Mr. Chan Nap Kee,

Joseph, Chairman

Sponsor’s Due Diligence on Mining Assets and

CPR (3 January 2020)

BAW Mineral Partners 2.5 hours

Metals and mining webinar (5 March 2020) Bloomberg Commodities 1 hour

Sustainable investing — a path to returns and

responsible business (1 April 2020)

1 hour

Bank’s Support Measures for SMEs (webinar)

(18 March 2020)

Hong Kong General

Chamber of Commerce

1 hour

The Next Generation of Internal Auditing

(webinar) (23 April 2020)

1.5 hours

HKGCC — Legislative Proposals to Introduce a

Statutory Corporate Rescue Procedure and

Insolvent Trading Provisions (webinar)

(23 July 2020)

1.5 hours

Dividend Policy and Share Buybacks (webinar)

(23 April 2020)

Professional Development

Resources Centre Limited

2 hours

HKVCA Asia Venture Capital Forum 2020

(webinar) (6 July 2020)

Hong Kong Venture Capital

and Private Equity

Association (HKVAC)

2 hours

Hong Kong’s new limited partnership fund

regime (webinar) (21 July 2020)

1 hour

Hong Kong tax update: DIPN 61 and the LPFO

(webinar) (6 August 2020)

1 hour

HKVCA 19th China Private Equity Summit

2020 (28 August 2020)

5.5 hours

56



Name and


Post pandemic development: Hong Kong and

the world Session 1,2,3 (webinar)

(24, 28, 29 April 2020)

Silk Road Economic

Development Research

Centre/Hong Kong Energy,

Mining and Commodities

Association

3 hours

Post pandemic business development potential

in Belt and Road Malaysia (webinar)

(19 June 2020)

1.5 hours

Risk of Crew Changes and Sustainability of

Global Supply Chain during Covid-19

Pandemic (webinar) (10 August 2020)

0.5 hour

Why Hong Kong should be chosen as a venue

for commercial dispute resolutions in the

projects under the Greater Bay Area and Belt

and Road Initiative (webinar)

(21 August 2020)

0.5 hour

“Insider’s Guide to Livestream and KOL

Marketing in Mainland China” (webinar)

(5 June 2020)

Marketing Pulse/Hong Kong

Trade Development Council

1.5 hours

2nd Shangdong Business Conference and

Youth Entrepreneurship (webinar)

(30 June 2020)

Conference of Great

Business Partners

2.5 hours

The rise of onshore fund regimes in Hong

Kong and Singapore (webinar) (30 June 2020)

KPMG 1.5 hours

Asset Management Series: The Limited

Partnership Fund Regime — Highlighting its

use for PE, Real Estate and Private Credit and

Debt Funds. (webinar) (15 September 2020)

1 hour

57



Name and


SCMP Conversations: Economy- Are online

services the investment product of the future

(Webinar) (9 July 2020)

South China Morning Post 1 hour

SCMP Conversations: Economy — Has

Covid-19 proven sustainable investing is more

important than ever? (webinar)

(18 August 2020)

1 hour

China Daily Asia Leadership Roundtable:

“Getting Your Business Ready for a post-

COVID World” (webinar) (29 July 2020)

China Daily 1 hour

Enforcement Powers of the SFC and Recent

Enforcement Cases (Webinar) (14 July 2020)

Debevoise & Plimpton 1 hour

Debt Recovery and Asset Tracing (webinar)

(3 September 2020)

1 hour

BDO Webinar: Case study and insights into

listco suspension (webinar) (31 July 2020)

BDO 2 hours

BDO Webinar: Corporate governance risk

under COVID-19 and the impact on internal

audit review (webinar) (5 August 2020)

1 hour

“Riding Ups and Downs: Hong Kong-Indonesia

Partnership” (webinar) (18 August 2020)

Commerce and Economic

Development Bureau,

HKSAR Government

2 hours

Supply chain Finance- How to improve

cashflow amid pandemic (4 September 2020)

Asia Logistics, Maritime and

Aviation Conference

1 hour

Deal drivers in Healthcare and Life Sciences:

Mainland China (Webinar) (9 September 2020)

Mergermarket Events 1 hour

Space law fundamentals for finance

professionals (Webinar) (22 September 2020)

King & Wood Mallesons

Events Team Hong Kong

1 hour

58



Name and


“Brimming with opportunities”: Prospects in

Myanmar for Hong Kong investors (Webinar)

(20 October 2020)

Myanmar-HongKong

Chamber of Commerce and

Industry

1 hour

Hong Kong and the Greater Bay Area:

Internationalisation and Integration (Webinar)

(17 November 2020)

CGTN Think Tank 3 hours

Greater Bay Area Conference 2020 GBA:

The Way Forward Practice (18 November

2020)

China Daily and Silk Road

Economic Development

Research Center

5 hours

A Business Vision for a Sustainable and

Inclusive Future (Virtual platform)

(30 November 2020)

Belt & Road Summit Hong

Kong Trade Development

Council

7.5 hours

A Business Vision for a Sustainable and

Inclusive Future (Virtual platform)

(1 December 2020)

5.5 hours

Total 67 hours

Mr. Yang Yongcheng,

Executive Director

Professional Development Seminar 2020

— BEPS update (Webinar) (4 November 2020)

Hodgson Impey Cheng

Limited

1 hour

Total: 1 hour

Mr. Liew Swee Yean,

Independent non-

executive director

How to identify and detect and financial

statement fraud in the digital age (Webinar)

(12 November 2020)

Accounting Development

Foundation Limited

2 hours

Staying ahead of the curve — Insights for

financial reporting of Cloud computing

business (Webinar) (18 November 2020)

2 hours

Digitising Corporate Governance (Webinar)

(13 November 2020)

Tricor Services Limited 3.5 hours

59



Name and


The Latest Developments on China and Hong

Kong Taxation, Incremental Borrowing Rate

and Sale and Purchase Agreement (Webinar)

(17–20 November 2020)

RSM Academy 5 hours

Anti-Money Laundering (AML) for License

Corporations and Money Lenders (Webinar)

(26 November 2020)

SW Institute of Knowledge

Enhancement Limited

1.5 hours

Latest Updates on HKEX ESG Reporting

Guide and related Challenges (Webinar)

(30 November 2020)

1.5 hours

Internal Audit Function: Risk Management,

Corporate Governance and Internal Control

(Webinar) (10 December 2020)

1.5 hours

Elderly care services industry in Mainland

China (archived webinar) (24 November 2020)

Hong Kong Institute of

Certified Public Accountants

1.5 hours

Crisis Management and Social Media from the

Investor Relations Perspective (webinar)

(25 November 2020)

1.5 hours

Handling regulatory investigations (financial

sector) (archived webinar) (27 November

2020)

1.5 hours

Thematic sharing: Property investment in the

Greater Bay Area by Hong Kong citizens

(archived webinar) (29 November 2020)

1.5 hours

The coming of limited partnership fund regime

— A breakthrough for Hong Kong’s fund and

asset management industry (archived webinar)

(30 November 2020)

1.5 hours

Total 24.5 hours

60



Name and


Dr. Wong Yun Kuen,

Independent non-

executive director

Annual Corporate and Regulatory Update

2020 (5 June 2020)

The Hong Kong Institute of

Chartered Secretaries

6 hours

Total 6 hours

Mr. Siu Siu Ling,

Independent non-

executive director

Starting and Managing Your Professional

Practice (15 April 2020)

Blockchain for Lawyer (17 April 2020)

The New China Individual Income Tax Law

(21 April 2020)

Islamic Finance: Where can we go from here?

(22 April 2020)

Data Analytics — how to tell stories with data

(24, 27 April 2020)

Robotics Process Automation — Analyst

Training (5, 7 May 2020)

Bitcoin & Blockchain Basics for Lawyers

(6 May 2020)

Natural Language Processing with Artificial

Intelligence (7, 14 May 2020)

Managing Data Breach (8 May 2020)

Update on Conveyancing Cases 2020

(11 May 2020)

Robotics Process Automation — Administrator

Training (13, 15 May 2020)

Insider Dealing (20 May 2020)

Total

The Law Society of Hong

Kong

1 hour

1 hour

2 hours

1.5 hours

6 hours

6 hours

1.5 hours

6 hours

1 hour

2 hours

6 hours

1.5 hours

35.5 hours

61



CORPORATE SOCIAL RESPONSIBILITYAmid coronavirus, our effort to enhance Corporate Social Responsibility continued in 2020. We promoted cultural

exchange between Hong Kong, Belt and Road Countries and Greater Bay Area in 2020 by supporting Silk Road

Economic Development Research Centre. Major events in 2020 included co-organizing Belt and Road Events as

follow:

1. April to August 2020 — WebinarsIn 2020 amid coronavirus, webinars were co-organised instead of physical seminars so as to observe social

distancing practice. Four seminars titled “The Silk Road Webinar Series” were organized as follow:

Date Webinar Topic

24–29 April, 2020 Post pandemic development: Hong Kong and the world Session 1, 2, 3

19 June, 2020 Post pandemic business development potential in Belt and Road Malaysia

(i) Trade and Investment Opportunities with Malaysia

(ii) Starting your business in Malaysia

(iii) Industrial and Commercial Properties in Malaysia

10 August, 2020 Risk of Crew Changes and Sustainability of Global Supply Chain during Covid-19

Pandemic

21 August, 2020 Why Hong Kong should be chosen as a venue for commercial dispute resolutions

in the projects under the Greater Bay Area and Belt and Road Initiative

62



2. November 2020“Greater Bay Area Conference: The way forward for Hong Kong” held on 18 November, 2020 was

co-organized by Silk Road Economic Development Research Centre and China Daily.

Keynote address were delivered by Mr. Leung Chun-ying, Vice Chairman of the National Committee of the

Chinese People’s Political Consultative Conference, and Chief Executive Mrs. Carrie Lam. Various distinguished

speakers were invited.

When delivering the welcoming speech, Mr. Joseph

Chan, Kaisun’s Chairman, expressed his view that Hong

Kong and cities in the Greater Bay Area can

complement each other, and Hong Kong will not be

replaced.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Directors acknowledge their responsibility for preparing the financial statements of the Group.

The statement by the Auditors of the Company about their reporting responsibilities is set out on page 71 to 73 of

this report.

MANAGEMENT’S VIEW ON THE AUDIT QUALIFICATIONThe management of the Company has given careful consideration to the Qualified Opinion and the basis of the

Qualification and has had ongoing discussion with RSM when preparing the Group’s consolidated financial

statements.

The Qualification of (a) Opening balances and correspondence figures represented the brought forward effect of the

Qualified Opinion on the consolidated financial statement from year ended 31 December 2019.

63



For Qualification of (b) Investment in associates and (d) Discontinued operations in the production and exploitation

of coal business in Tajikistan, the management understand that the issue of the Qualified Opinion was caused by

insufficient information provided to RSM due to the COVID-19 pandemic in United Kingdom and Tajikistan. Our

management had urged the management of SCH Group and in Tajikistan to provide the requisite materials for the

audit work of the Group’s consolidated financial statements. Despite these efforts, they cannot promptly provide

the information to RSM. As a result, RSM could not complete its audit work. The COVID-19 pandemic had seriously

impacted United Kingdom and Tajikistan, the local staff was unable to access and obtain the information due to the

local lockdown measures and hence, the preparation of the information requested was delayed.

For (c) Long term deposits, as certain precedent conditions for the completion of the acquisition as set out in the

Agreement have not been completed, the directors of the Company considered the acquisition has not been

completed as at 31 December 2019, 31 December 2020, and up to the date of approval of consolidated financial

statements. In addition, the Group was unable to access the accounting books and records of Double Up Group

pending completion of the acquisition. As a result, the Group is unable to exercise control over Double Up Group.

Due to the COVID-19 pandemic and the travel restrictions, the management of the Company is unable to travel to

Mongolia to complete the deal.

With respect to the type of audit opinion issued by RSM, the management of the Company acknowledged and

agreed with the audit opinion RSM issued based on their professional and independent assessment.

AUDIT COMMITTEE’S VIEW ON THE AUDIT QUALIFICATIONThe audit committee of the Company confirmed that it had independently review and agreed with the

management’s position concerning the Qualified Opinion for reasons stated in paragraph headed “Management’s

View on the Audit Qualification”.

REMOVAL OF AUDIT QUALIFICATIONAfter discussion with RSM, the management of the Company is of the view that the Qualified Opinion in relation

to (b) Investment in associates and (d) Discontinued operations in the production and exploitation of coal business

in Tajikistan will be removed when the COVID-19 pandemic is over and the operation resumes normal. For (c) Long

term deposits, the management of the Company will travel to Mongolia once the travel restriction lifted and

complete the deal as early as possible. When the management obtain accounting books and records and

consolidate into Group’s financial statements, the qualification will be removed. And (a) opening balances and

correspondence figures will be removed accordingly after (b) to (d) removed.


64

Independent Auditor’s Report

TO THE SHAREHOLDERS OF KAISUN HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

QUALIFIED OPINIONWe have audited the consolidated financial statements of Kaisun Holdings Limited (the “Company”) and its

subsidiaries (the “Group”) set out on pages 74 to 164, which comprise the consolidated statement of financial

position as at 31 December 2020, and the consolidated statement of profit or loss, consolidated statement of profit

or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement

of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of

significant accounting policies.

In our opinion, except for the effects of matters described in the Basis for Qualified Opinion Section of our report,

the consolidated financial statements give a true and fair view of the consolidated financial position of the Group

as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year

then ended in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International

Accounting Standards Board and have been properly prepared in compliance with the disclosure requirements of the

Hong Kong Companies Ordinance.

BASIS FOR QUALIFIED OPINION(a) Opening balances and corresponding figures

Our audit opinion on the consolidated financial statements of the Group for the year ended 31 December

2019 issued on 23 November 2020 (the “2019 Financial Statements”), which form the basis for the

corresponding figures presented in the current year’s consolidated financial statements, was modified because

of the limitation on our scope of work described in paragraph (b) to paragraph (d) below on the 2019

Financial Statements in respect of investment in associates, long-term deposits and discontinued operations in

the production and exploitation of coal business in Tajikistan. Any adjustments that might be found necessary

as a result of the matters described in paragraph (b) to paragraph (d) below might have a consequential

effect on the Group’s results and cash flows for the year ended 31 December 2019 and the financial position

of the Group as at 31 December 2019 and the related disclosures thereof in the 2019 Financial Statements.


65


BASIS FOR QUALIFIED OPINION (Continued)(a) Opening balances and corresponding figures (Continued)

The matters giving rise to the abovementioned limitations on our audit of work were not resolved in our audit

of the Group’s 2020 consolidated financial statements and are further detailed in paragraph (b) to paragraph

(d) below.

Our opinion on the Group’s consolidated financial statements for the year ended 31 December 2020 is also

modified because of the possible effects of the matters on the comparability of the current year’s figures and

the corresponding figures.

(b) Investment in associatesAs disclosed in note 22 to the consolidated financial statements, the Group acquired 45.56% equity interest

in SCH Limited (“SCH”) on 11 November 2019 (the “Acquisition Date”) at the consideration of US$1

(equivalent to HK$8). SCH is an investment holding company and held 90.04% interest in Sturgeon Capital

Limited (“Sturgeon Capital”). Prior to the acquisition, the Group held 9.96% interest in Sturgeon Capital and

recorded the investment as financial assets at fair value through other comprehensive income (“FVTOCI”) in

the 2019 Financial Statements. As the directors considered the Group had significant influence over SCH and

Sturgeon Capital, the acquisition resulted in SCH and Sturgeon Capital becoming the Group’s associate, the

Group derecognised the 9.96% interest in Sturgeon Capital recorded as financial assets at FVTOCI with an

amount of approximately HK$7,800,000 at the Acquisition Date and a fair value loss of approximately

HK$5,841,000 on the derecognition was recognised and charged to other comprehensive income in the 2019

Financial Statements.

Due to the outbreak of COVID-19 pandemic since early 2020, the operations of SCH and Sturgeon Capital

were affected. The directors of the Company advised that the Group were unable to access the books and

records of SCH and Sturgeon Capital since the Acquisition Date. As such, no adequate financial information

of SCH and Sturgeon Capital was available for the preparation of purchase price allocation to assess (i) the

fair value of the identifiable assets and liabilities of SCH and Sturgeon Capital at the Acquisition Date; (ii) fair

value remeasurement of the 9.96% interest in Sturgeon Capital recorded as financial assets at FVTOCI held by

the Group at the Acquisition Date and (iii) to account for SCH and Sturgeon Capital subsequent to the

acquisition under the equity method in IAS 28 “Investments in Associates and Joint Ventures”.

In view of the business and operations of SCH and Sturgeon Capital have been still affected by the pandemic

recently, the directors of the Company are negotiating with the management of SCH and Sturgeon to

terminate the share swap and restructuring arrangement as disclosed in note 22 and have decided to make a

full impairment loss to the carrying amount of investment in associates and recognised the loss of

approximately HK$1,959,000 in the consolidated statement of profit or loss for the year ended 31 December

2020.


66


BASIS FOR QUALIFIED OPINION (Continued)(b) Investment in associates (Continued)

In the absence of the relevant financial information of SCH and Sturgeon Capital, we were unable to obtain

sufficient appropriate audit evidence to satisfy ourselves as to the (i) the fair value of the assets and liabilities

of SCH and Sturgeon Capital at the Acquisition Date; (ii) fair value loss on remeasurement of the Group’s

previously held interest of 9.96% in Sturgeon Capital recognised in other comprehensive income of

approximately HK$5,841,000 for the year ended 31 December 2019; (iii) the accounting for SCH and

Sturgeon Capital under the equity method in IAS 28 “Investments in Associates and Joint Ventures” for the

years ended 31 December 2019 and 2020; and (iv) whether the impairment loss of approximately

HK$1,959,000 recognised for the year ended 31 December 2020 was fairly stated.

(c) Long-term depositsIncluded in long-term deposits in the consolidated statement of financial position as at 31 December 2019

and 2020 were deposits of HK$20,000,000 paid to the vendor in relation to the proposed acquisition of the

entire equity interest in Double Up Group Limited and its subsidiary (“Double Up Group”) at the consideration

of HK$30,000,000. As detailed in our auditor’s report of the 2019 Financial Statements and note 24 to the

consolidated financial statements, the directors of the Company consider that the Group is unable to exercise

control over Double Up Group due to commercial disputes with the vendor which had delayed the completion

of the acquisition. In addition, the Group was unable to access the accounting books and records of Double

Up Group pending completion of the acquisition. The directors of the Company further advised that the

Group continues its efforts to try to settle the disputes with the vendor and hence to complete the

acquisition but the disputes remained unsettled and the acquisition of Double Up Group had not yet

completed as at 31 December 2020 and up to the date of approval of these consolidated financial

statements.

Due to the absence of the accounting records and other relevant information related to Double Up Group, we

were unable to obtain sufficient appropriate audit evidence to determine whether the directors’ assessment

that the Group was not able to exercise control over Double Up Group was appropriate, and hence that

Double Up Group should not be consolidated in accordance with IFRS 10 “Consolidated Financial

Statements”. Our audit opinion on the 2019 Financial Statements was modified accordingly. Our audit opinion

on the consolidated financial statements for the year ended 31 December 2020 is also modified because of

the limitations on our audit of work remained unresolved during our audit of the Group’s consolidated

financial statements for the year ended 31 December 2020.


67


BASIS FOR QUALIFIED OPINION (Continued)(d) Discontinued operations in the production and exploitation of coal business in Tajikistan

The Group dissolved the entire issued share capital of Better Business International Limited (“Better Business”)

and shut down the production and exploitation of coal business in Tajikistan during the year ended 31

December 2019. As detailed in our auditor’s report of the 2019 Financial statements and note 16 to the

consolidated financial statements, because the complete set of books and records together with the

supporting documents of a subsidiary of Better Business — Sangghat LLC, which mainly operated the

production and exploitation of coal business in Tajikistan, were not available to the directors of the Company,

accordingly we were unable to obtain sufficient appropriate audit evidence that the abandonment of the coal

business in Tajikistan had been completed during the year ended 31 December 2019 and therefore that it was

appropriate to classify the coal business in Tajikistan as discontinued operations. The limitations on our audit

of work were remained unresolved during our audit of the Group’s consolidated financial statements for the

year ended 31 December 2020. In addition, we were unable to obtain sufficient appropriate audit evidence

about (i) the cash and bank balance of approximately HK$14,000, other payables and accruals of

approximately HK$4,569,000 and current tax liabilities of approximately HK$479,000 included in the Group’s

consolidated statement of financial position as at 31 December 2019 and 2020 and the relevant disclosures in

the consolidated financial statements; and (ii) the loss of the discontinued operation of approximately

HK$3,408,000 for the period from 1 January 2019 to 6 November 2019 as presented in the Group’s

consolidated statement of profit or loss for the year ended 31 December 2019 and the relevant disclosure in

note 16 to the consolidated financial statements.

Any adjustments that might be found necessary as a result of the matters described above might have a

consequential effect on the Group’s results and cash flows for the year ended 31 December 2020 and the financial

position of the Group as at 31 December 2020 and the related disclosures thereof in the consolidated financial

statements.

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong Kong

Institute of Certified Public Accountants (the “HKICPA”). Our responsibilities under those standards are further

described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our

report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional

Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We

believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified

opinion.

MATERIAL UNCERTAINTY RELATED TO GOING CONCERNWe draw attention to Note 2 in the consolidated financial statements, which indicates that the Group incurred a

net loss of approximately HK$64,267,000 during the year ended 31 December 2020 and, as of that date, the Group

had net current liabilities of approximately HK$92,357,000. As stated in Note 2, these events or conditions, indicate

that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going

concern. Our opinion is not modified in respect of this matter.


68


KEY AUDIT MATTERSKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of

the consolidated financial statements of the current period. These matters were addressed in the context of our

audit of the consolidated financial statements, and in forming our opinion thereon, and we do not provide a

separate opinion on these matters. The key audit matters we identified are:

1. Impairment assessment of intangible assets — mining rights

2. Impairment assessment of trade receivables

3. Impairment assessment of deposits and other receivables

Key Audit Matter How our audit addressed the Key Audit Matter

Impairment assessment of intangible assets — mining rights

Refer to note 21 and the accounting policies

note 4(g)(i) and (y) to the consolidated financial

statements.

The carrying amount of the Group’s mining

rights included in the balance of intangible

assets was approximately HK$110,369,000 as at

31 December 2020.

The recoverable amounts of the mining rights

are determined based on their value in use. An

i n d e p e n d e n t v a l u e r w a s e n g a g e d b y

management to assist in their impairment

assessment of the mining rights.

The preparation of discounted cash flows

forecasts involves the exercise of significant

management judgement in particular in

estimating selling price, future costs of

production, recoverable reserves, resources and

exploration potential and discount rates.

Our procedures in respect of the impairment assessment of

intangible assets included:

• assessing the professional competency and independence

of the valuation expert engaged by management;

• assessing the reasonableness of the key assumptions

underlying the cash flows applied in the valuation model

and the appropriateness of the discount rate used with

the assistance of our internal valuation specialists; and

• considering the adequacy of the Group’s disclosures in

relation to the impairment assessment of intangible

assets.


69



Impairment assessment of trade receivables

As at 31 December 2020, the Group had trade

receivables of approximately HK$26,643,000, net

of allowance for doubtful debts as disclosed in

note 27 to the consol idated f inancia l

statements.

With the assistance of an independent valuer,

management performed periodic assessment of

the recoverability of the trade receivables and

the sufficiency of allowance for doubtful debts

based on information including credit profile of

different customers, debtor ageing, historical

settlement records, subsequent settlement

status, expected timing and amount of

realisation of outstanding balances, and on-

going trading relationships with the relevant

customers; and also considered forward looking

information that may impact the customers’

ability to repay the outstanding balances in

order to estimate the expected credit losses for

the impairment assessment.

The impairment assessment of trade receivables

under the expected credit losses model involved

the use of significant management judgements

and estimates.

Our audit procedures in respect of the impairment assessment

of trade receivables included:



• assess ing whether trade receivables had been

appropriately grouped by management based on their

shared credit risk characteristics;

• testing the accuracy and completeness of the data used

by management to develop the historical loss rates and

assessing the sufficiency, reliability and relevance of that

data;

• with the assistance of our internal valuation experts,

testing the calculation of the historical loss rate and

evaluating the reasonableness of the forward-looking

adjustments made to reflect current and forecast future

economic conditions;

• testing the accuracy of the aging of trade receivables on

a sample basis to supporting documents; and

• testing the calculation of expected credit loss provisions

applying the provision rates to the age categories of the

trade receivables outstanding at the reporting date.


70



Impairment assessment of deposits and

other receivables

As at 31 December 2020, the Group had

deposits, prepayments and other receivables of

approximately HK$19,075,000 as disclosed in

note 28 to the consol idated f inancia l

statements.

With the assistance of an independent valuer,

expected credit losses are determined by

management based on their assessment on the

credit risks for the deposits and other

receivables since their initial recognition.

Significant judgement is required to be exercised

when applying the impairment assessment

model , inc luding the determinat ion of

appropriate key parameters including the

probability of default and loss given default,

identifying any significant deterioration in credit

quality and determining the assumptions used in

the expected credit losses model including

economic indicators for forward looking

information and the application of economic

scenarios and probability weightings.

We focused on this area due to the magnitude

of deposits and other receivables and the

significance of management’s judgements

applied in assessing the impairment of such

balances.

Our audit procedures in respect of the impairment assessment

of deposits and other receivables included:



• evaluating the expected credit losses model used by

management and assessing key parameters and

assumptions, including probability of default, loss given

default and forward-looking information, made by

management with reference to the relevant historical

credit loss data of the Group and observable external

economic data with the assistance of our internal

valuation experts;

• discussing with management to understand their process

of collecting and applying the information in assessing

probability of default and loss given default and

identifying significant deterioration in credit risk. We

corroborated management’s explanation with supporting

evidence;

• checking the relevant contract terms, and conducted

background search to evaluate the financial position of

the debtors on a sample basis;

• reviewing the appropriateness of economic indicators

se lected by management for forward looking

information; evaluating the economic scenarios and the

under l y ing p robab i l i t y we ight ings app l i ed by

management; and testing the resulting calculation of the

economic indicators determined; and

• recalculating the provision for expected credit losses made

by the management to verify the accuracy.


71


OTHER INFORMATIONThe directors are responsible for the Other Information. The Other Information comprises all of the information

included in the annual report other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the Other Information and we do not express

any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the Other

Information and, in doing so, consider whether the Other Information is materially inconsistent with the

consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially

misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this

Other Information, we are required to report that fact. As described in the Basis for Qualified Opinion section

above, we were unable to obtain sufficient appropriate evidence about the opening balances and corresponding

figures, the carrying amount of the Group’s investment in associates as at 31 December 2020, the Group’s share of

the associates’ net profit or loss for the year, the long-term deposits for the acquisition of Double Up Group and

the discontinued operation in the production and exploitation of coal business in Tajikistan. Accordingly, we are

unable to conclude whether or not the Other Information is materially misstated with respect to these matters.

RESPONSIBILITIES OF DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTSThe directors are responsible for the preparation of the consolidated financial statements that give a true and fair

view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for

such internal control as the directors determine is necessary to enable the preparation of consolidated financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or

have no realistic alternative but to do so.

The Audit Committee assists the directors in discharging their responsibilities for overseeing the Group’s financial

reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes

our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume

responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these consolidated financial statements.


72


AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional

skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that

is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on

the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may

cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material

uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the

consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future

events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the

disclosures, and whether the consolidated financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are responsible

for the direction, supervision and performance of the group audit. We remain solely responsible for our audit

opinion.

We communicate with the Audit Committee, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements

regarding independence, and to communicate with them all relationships and other matters that may reasonably be

thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards

applied.


73


AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)From the matters communicated with the Audit Committee, we determine those matters that were of most

significance in the audit of the consolidated financial statements of the current period and are therefore the key

audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure

about the matter or when, in extremely rare circumstances, we determine that a matter should not be

communicated in our report because the adverse consequences of doing so would reasonably be expected to

outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Wong Poh Weng.

RSM Hong Kong

Certified Public Accountants

Hong Kong

22 March 2021


74

For the year ended 31 December 2020

Consolidated Statement of Profit or Loss

2020 2019

Note HK$’000 HK$’000

Continuing operations

Revenue 8 35,958 138,566

Cost of goods sold (22,585) (116,707)

Gross profit 13,373 21,859

Gain/(loss) on disposal of financial assets at fair value through profit

or loss (“FVTPL”) 1,000 (28,584)

Fair value loss on financial assets at FVTPL (18,139) (24,456)

Fair value gain on financial liabilities at FVTPL 6,347 2,989

Impairment loss on trade and other receivables (4,762) (114,164)

Impairment loss on intangible assets — (23,288)

Impairment loss on investment in associates (1,959) —

Impairment loss on goodwill (1,118) —

Recovery income from trade and other receivables written

off/(trade and other receivables written off) 161 (101,063)

Loss on disposal of subsidiaries — (281)

Other gains and losses 9 563 2,759

Administrative and other operating expenses (60,229) (70,890)

Loss from operations (64,763) (335,119)

Finance costs 10 (4,942) (4,372)

Loss before tax (69,705) (339,491)

Income tax credit 11 5,438 14,430

Loss for the year from continuing operations 12 (64,267) (325,061)

Discontinued operations

Loss for the year from discontinued operations 16 — (3,408)

Loss for the year (64,267) (328,469)


75

Consolidated Statement of Profit or LossFor the year ended 31 December 2020

2020 2019


Attributable to:

Owners of the Company

Loss for the year from continuing operations (60,295) (314,730)

Loss for the year from discontinued operations — (3,400)

Loss attributable to the owners of the Company (60,295) (318,130)

Non-controlling interests


Loss for the year from discontinued operations — (8)

Loss attributable to non-controlling interest (3,972) (10,339)

(64,267) (328,469)

Loss per share (cents)

From continuing and discontinued operations

Basic 17 (10.46) (55.18)

From continuing operations

Basic 17 (10.46) (54.59)


76


Consolidated Statement of Profit or Loss and Other Comprehensive Income

2020 2019


Loss for the year (64,267) (328,469)

Other comprehensive income

Items that will not be reclassified to profit or loss:

Fair value loss on equity instruments at FVTOCI — (5,841)

Items that may be reclassified to profit or loss:

Exchange differences on translating foreign operations 4,900 195

Other comprehensive income for the year, net of tax 4,900 (5,646)

Total comprehensive income for the year (59,367) (334,115)

Attributable to:

Owners of the Company


Loss for the year from discontinued operations — (2,740)

Loss attributable to owners of the Company (50,288) (323,779)

Non-controlling interests


Loss for the year from discontinued operations — (6)

Loss attributable to non-controlling interests (9,079) (10,336)

(59,367) (334,115)


77

At 31 December 2020

Consolidated Statement of Financial Position

2020 2019


Non-current assets

Property, plant and equipment 18 12,650 22,633

Right-of-use assets 19 15,490 17,521

Goodwill 20 — 1,118

Intangible assets 21 166,398 114,099

Investment in associates 22 — 1,959

Financial assets at FVTOCI 23 19,100 19,100

Long-term deposits 24 20,000 20,000

Deferred tax assets 36 6,173 3,180

239,811 199,610

Current assets

Inventories 26 6,996 5,063

Financial assets at FVTPL 25 36,293 52,489

Trade and bills receivables 27 27,284 27,063

Deposits, prepayments and other receivables 28 19,075 29,154

Bank and cash balances 29 24,331 27,507

113,979 141,276

Current liabilities

Trade payables 30 5,312 4,478

Other payables and accruals 31 130,423 47,428

Bond payables 32 50,000 50,000

Other financial liabilities 33 14,713 30,646

Lease liabilities 34 1,231 1,703

Redeemable convertible preference shares 35 525 —

Current tax liabilities 4,132 4,382

206,336 138,637

Net current (liabilities)/assets (92,357) 2,639

Total assets less current liabilities 147,454 202,249


78

Consolidated Statement of Financial PositionAt 31 December 2020

2020 2019


Non-current liabilities

Other financial liabilities 33 21,951 12,365

Lease liabilities 34 1,390 3,158

Redeemable convertible preference shares 35 — 511

Deferred tax liabilities 36 26,013 27,038

49,354 43,072

NET ASSETS 98,100 159,177

Capital and reserves

Share capital 37 57,657 57,657

Reserves 39 17,494 67,655

Equity attributable to owners of the Company 75,151 125,312

Non-controlling interests 22,949 33,865

TOTAL EQUITY 98,100 159,177

Approved by the Board of Directors on 22 March 2021 and are signed on its behalf by:

CHAN Nap Kee, Joseph YANG Yongcheng


79


Consolidated Statement of Changes in Equity

Attributable to owners of the Company

Share

capital

Shares held

under share

award

scheme

Share

premium

Foreign

currency

translation

reserve

Financial

assets at

FVTOCI

reserve

Accumulated

losses Total

Non-

controlling

interests Total equity

(note 40) (note 39(b)(i)) (note 39(b)(ii)) (note 39(b)(iii))

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2019 57,657 (395) 1,363,055 (9,479) 2,400 (959,211) 454,027 45,370 499,397

Total comprehensive income

for the year — — — 192 (5,841) (318,130) (323,779) (10,336) (334,115)

Purchase of shares held under

the share award scheme — (2,976) — — — — (2,976) — (2,976)

Transfer — — — — 5,841 (5,841) — — —

Dividend paid (note 15) — — (1,960) — — — (1,960) — (1,960)

Disposal of subsidiaries

(note 42(b)) — — — — — — — (2,329) (2,329)

Capital injection by non-

controlling interest in a

subsidiary — — — — — — — 1,160 1,160

Changes in equity for the year — (2,976) (1,960) 192 — (323,971) (328,715) (11,505) (340,220)

At 31 December 2019 and

1 January 2020 57,657 (3,371) 1,361,095 (9,287) 2,400 (1,283,182) 125,312 33,865 159,177

Total comprehensive income

for the year — — — 10,007 — (60,295) (50,288) (9,079) (59,367)

Purchase of non-controlling

interest (note 42(a)) — — — — — 127 127 (1,837) (1,710)

Changes in equity for the year — — — 10,007 — (60,168) (50,161) (10,916) (61,077)

At 31 December 2020 57,657 (3,371) 1,361,095 720 2,400 (1,343,350) 75,151 22,949 98,100


80


Consolidated Statement of Cash Flows

2020 2019Note HK$’000 HK$’000

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before tax— continuing operations (69,705) (339,491)— discontinued operations — (3,408)

(69,705) (342,899)

Adjustments for:Depreciation on property, plant and equipment 1,000 3,300Depreciation on right-of-use assets 1,849 2,322Amortisation of intangible assets 10,190 10,305(Gain)/loss on disposal of financial assets at FVTPL (1,000) 28,584Fair value loss on financial assets at FVTPL 18,139 24,456Fair value gain on financial liabilities at FVTPL (6,347) (2,989)Impairment loss on trade and other receivables 4,762 114,164Impairment loss on intangible assets — 23,288Impairment loss on investment in associates 1,959 —

Impairment loss on goodwill 1,118 —

Trade and other receivables written off — 101,063Loss on disposal of property, plant and equipment 26 60Loss on disposal of subsidiaries — 281Property, plant and equipment written off — 148Derecognition of lease liabilities (928) (585)Derecognition of right-of-use assets 904 564Finance costs 4,942 4,372Investment income (216) (1,922)

Operating loss before working capital changes (33,307) (35,488)Increase in inventories (1,533) (2,540)(Increase)/decrease in trade and bills receivables (2,303) 14,685Decrease/(increase) in deposits, prepayments and other receivables 5,815 (22,835)Increase in trade payables 530 9,958Increase in other payables and accruals 77,591 10,084

Cash generated from/(used in) operations 46,793 (26,136)Purchase of financial assets at FVTPL (16,707) (69,409)Net proceeds from disposal of financial assets at FVTPL 15,764 98,014Income tax paid (375) (258)Interest paid — (4,001)Interest on lease liabilities 42(d) (239) (361)

Net cash generated from/(used in) operating activities 45,236 (2,151)


81

Consolidated Statement of Cash FlowsFor the year ended 31 December 2020

2020 2019Note HK$’000 HK$’000

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 145 517Dividend income from equity investments 71 1,405Purchases of property, plant and equipment (49) (2,435)Proceeds from disposals of property, plant and equipment 22 13Purchases of financial assets at FVTOCI — (1,000)Purchase of intangible assets 42(e) (39,088) —

Disposal of subsidiaries 42(b) — 10

Net cash used in investing activities (38,899) (1,490)

CASH FLOWS FROM FINANCING ACTIVITIES

Capital injection by non-controlling interest in a subsidiary — 1,160Proceeds from redeemable convertible preference shares — 501Proceeds from other financial liabilities — 13,000Payments on repurchase of shares under share award scheme — (2,976)Principal elements of lease payments 42(d) (1,282) (1,688)

Net cash (used in)/generated from financing activities (1,282) 9,997

NET INCREASE IN CASH AND CASH EQUIVALENTS 5,055 6,356

Effect of foreign exchange rate changes (8,231) 421

CASH AND CASH EQUIVALENTS AT 1 JANUARY 27,507 20,730

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 24,331 27,507

ANALYSIS OF CASH AND CASH EQUIVALENTS

Bank and cash balances 24,331 27,507


82


Notes to the Consolidated Financial Statements

1. GENERAL INFORMATIONKaisun Holdings Limited (“the Company”) was incorporated in the Cayman Islands with limited liability. The

address of its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111,

Cayman Islands. The address of its principal place of business is 11/F, 46 Lyndhurst Terrace, Central, Hong

Kong. The Company’s shares are listed on the GEM of The Stock Exchange of Hong Kong Limited (the “Stock

Exchange”).

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note

41 to the consolidated financial statements.

2. BASIS OF PREPARATION AND GOING CONCERNThese consolidated financial statements have been prepared in accordance with all applicable International

Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board. IFRSs comprise

International Financial Reporting Standards (“IFRS”); International Accounting Standards (“IAS”); and

Interpretations. These consolidated financial statements also comply with the applicable disclosure provisions of

the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (“GEM Listing Rules”) and

with the disclosure requirements of the Hong Kong Companies Ordinance (Cap. 622). Significant accounting

policies adopted by the Group are disclosed below.

The International Accounting Standards Board has issued certain new and revised IFRSs that are first effective

or available for early adoption for the current accounting period of the Group. Note 3 provides information

on any changes in accounting policies resulting from initial application of these developments to the extent

that they are relevant to the Group for the current and prior accounting periods reflected in these

consolidated financial statements.

The Group incurred a loss of approximately HK$64,267,000 during the year ended 31 December 2020 and, as

of that date, the Group had net current liabilities of approximately HK$92,357,000. These events or

conditions indicate the existence of a material uncertainty exists that may cast significant doubt on the

Group’s ability to continue as a going concern. Therefore, the Group may be unable to realise its assets and

discharge its liabilities in the normal course of business.

These consolidated financial statements have been prepared on a going concern basis, the validity of which

depends upon the financial support of Mr. Chan Nap Kee, Joseph, a substantial shareholder of the Company

who has significant influence over the Group and being a director of the Company, at a level sufficient to

finance the working capital requirements of the Group. The substantial shareholder has agreed to provide

adequate funds for the Group to meet its liabilities as they fall due. The directors are therefore of the

opinion that it is appropriate to prepare the consolidated financial statements on a going concern basis.

Should the Group be unable to continue as a going concern, adjustments would have to be made to the

consolidated financial statements to adjust the value of the Group’s assets to their recoverable amounts, to

provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as

current assets and liabilities, respectively.


83

Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020

3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

(a) Application of new and revised IFRSsThe Group has applied the Amendments to Reference to the Conceptual Framework in IFRS Standards

and the following amendments to IFRSs issued by the International Accounting Standard Board for the

first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020

for the preparation of the consolidated financial statements:

Amendments to IAS 1 and IAS 8 Definition of Material

Amendments to IFRS 3 Definition of a Business

Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform

Except as described below, the application of the Amendments to References to the Conceptual

Framework in IFRS Standards and the amendments to IFRSs in the current year had no material impact

on the Group’s financial positions and performance for the current and prior years and/or on the

disclosures set out in these consolidated financial statements.

Amendments to IAS 1 and IAS 8 Definition of MaterialThe amendments provide a new definition of material that states “information is material if omitting,

misstating or obscuring it could reasonably be expected to influence decisions that the primary users of

general purpose financial statements make on the basis of those financial statements, which provide

financial information about a specific reporting entity.” The amendments also clarify that materiality

depends on the nature or magnitude of information, either individually or in combination with other

information, in the context of the financial statements taken as a whole.

The application of the amendments had no impact on the consolidated financial statements.

Amendments to IFRS 3 Definition of a BusinessThe amendments clarify the definition of a business and provide further guidance on how to determine

whether a transaction represents a business combination. In addition, the amendments introduce an

optional “concentration test” that permits a simplified assessment of whether an acquired set of

activities and assets is an asset rather than business acquisition, when substantially all of the fair value

of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable

assets.


84


3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)

(a) Application of new and revised IFRSs (Continued) Amendments to IFRS 3 Definition of a Business (Continued)

The Group has applied the amendments prospectively to transactions for which the acquisition date is on

or after 1 January 2020.

These amendments had no impact on the consolidated financial statements but may impact future

periods should the Group enter into any business combination.

Amendments to IFRS 9, IAS 39 and IFRS 7, Interest Rate Benchmark ReformThe amendments modify specific hedge accounting requirements to allow hedge accounting to continue

for affected hedges during the period of uncertainty before the hedged items or hedging instruments

affected by the current interest rate benchmarks are amended as a result of the on-going interest rate

benchmark reform.

The application of the amendments had no impact on the consolidated financial statements.

(b) New and revised IFRSs in issue but not yet effectiveThe Group has not applied any new and revised IFRSs that have been issued but are not yet effective

for the financial year beginning 1 January 2020. These new and revised IFRSs include the following

which may be relevant to the Group.

Effective for

accounting

periods

beginning on

or after

Amendments to IFRS 16 COVID-19 Related Rent Concessions 1 January 2021

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark

Reform — Phase 2

1 January 2021

Amendments to IFRS 3 Reference to the Conceptual Framework 1 January 2022

Amendments to IAS 16 Property, plant and equipment: proceeds before intended use 1 January 2022

Amendments to IAS 37 Onerous contracts — cost of fulfilling a contract 1 January 2022

Annual Improvements to IFRSs 2018 — 2020 Cycle 1 January 2022

Amendments to IAS 1 Classification of liabilities as current or non-current 1 January 2023

The Group is in the process of making an assessment of what the impact of these amendments and

new standards is expected to be in the period of initial application. So far it has concluded that the

adoption of them is unlikely to have a significant impact on the consolidated financial statements.


85


4. SIGNIFICANT ACCOUNTING POLICIESThese consolidated financial statements have been prepared under the historical cost convention, unless

mentioned otherwise in the accounting policies below (e.g. certain financial instruments that are measured at

fair value).

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting

estimates. It also requires management to exercise its judgement in the process of applying the Group’s

accounting policies. The areas involving a higher degree of judgement or complexity, or areas where

assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5.

The significant accounting policies applied in the preparation of these consolidated financial statements are set

out below.

(a) ConsolidationThe consolidated financial statements include the financial statements of the Company and its

subsidiaries made up to 31 December. Subsidiaries are entities over which the Group has control. The

Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with

the entity and has the ability to affect those returns through its power over the entity. The Group has

power over an entity when the Group has existing rights that give it the current ability to direct the

relevant activities, i.e. activities that significantly affect the entity’s returns.

When assessing control, the Group considers its potential voting rights as well as potential voting rights

held by the other parties. A potential voting right is considered only if the holder has the practical

ability to exercise that right.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-

consolidated from the date the control ceases.

The gain or loss on the disposal of a subsidiary that results in a loss of control represents the difference

between (i) the fair value of the consideration of the sale plus the fair value of any investment retained

in that subsidiary and (ii) the Company’s share of the net assets of that subsidiary plus any remaining

goodwill and any accumulated foreign currency translation reserve relating to that subsidiary.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also

eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the

policies adopted by the Group.


86


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (a) Consolidation (Continued)

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the

Company. Non-controlling interests are presented in the consolidated statement of financial position and

consolidated statement of changes in equity within equity. Non-controlling interests are presented in the

consolidated statement of profit or loss and consolidated statement of profit or loss and other

comprehensive income as an allocation of profit or loss and total comprehensive income for the year

between the non-controlling shareholders and owners of the Company.

Profit or loss and each component of other comprehensive income are attributed to the owners of the

Company and to the non-controlling shareholders even if this results in the non-controlling interests

having a deficit balance.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are

accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). The

carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in

their relative interests in the subsidiary. Any difference between the amount by which the non-

controlling interests are adjusted and the fair value of the consideration paid or received is recognised

directly in equity and attributed to the owners of the Company.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less

impairment loss, unless the investment is classified as held for sale (or included in a disposal group that

is classified as held for sale).

(b) Business combination and goodwillThe acquisition method is used to account for the acquisition of a subsidiary in a business combination.

The consideration transferred in a business combination is measured at the acquisition-date fair value of

the assets given, equity instruments issued, liabilities incurred and any contingent consideration.

Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and

the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are

measured at their acquisition-date fair values.

The excess of the sum of the consideration transferred over the Group’s share of the net fair value of

the subsidiary’s identifiable assets and liabilities is recorded as goodwill. Any excess of the Group’s share

of the net fair value of the identifiable assets and liabilities over the sum of the consideration

transferred is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed

to the Group.

In a business combination achieved in stages, the previously held equity interest in the subsidiary is

remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated

profit or loss. The fair value is added to the sum of the consideration transferred in a business

combination to calculate the goodwill.


87


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (b) Business combination and goodwill (Continued)

The non-controlling interests in the subsidiary are initially measured at the non-controlling shareholders’

proportionate share of the net fair value of the subsidiary’s identifiable assets and liabilities at the

acquisition date.

After initial recognition, goodwill is measured at cost less accumulated impairment losses. For the

purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the

cash-generating units (“CGUs”) or groups of CGUs that is expected to benefit from the synergies of the

combination. Each unit or group of units to which the goodwill is allocated represents the lowest level

within the Group at which the goodwill is monitored for internal management purposes. Goodwill

impairment reviews are undertaken annually, or more frequently if events or changes in circumstances

indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to

its recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any

impairment is recognised immediately as an expense and is not subsequently reversed.

(c) AssociatesAssociates are entities over which the Group has significant influence. Significant influence is the power

to participate in the financial and operating policy decisions of an entity but is not control or joint

control over those policies. The existence and effect of potential voting rights that are currently

exercisable or convertible, including potential voting rights held by other entities, are considered when

assessing whether the Group has significant influence. In assessing whether a potential voting right

contributes to significant influence, the holder’s intention and financial ability to exercise or convert that

right is not considered.

Investment in an associate is accounted for in the consolidated financial statements by the equity

method and is initially recognised at cost. Identifiable assets and liabilities of the associate in an

acquisition are measured at their fair values at the acquisition date. The excess of the cost of the

investment over the Group’s share of the net fair value of the associate’s identifiable assets and

liabilities is recorded as goodwill which is included in the carrying amount of the investment. Any excess

of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of

acquisition is recognised in consolidated profit or loss.

The Group assesses whether there is an objective evidence that the interest in an associate may be

impaired. When any objective evidence exists, the entire carrying amount of the investment (including

goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its

recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying

amount. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms

part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in

accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently

increases.


88


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) Associates (Continued)

The Group’s share of an associate’s post-acquisition profits or losses and other comprehensive income is

recognised in consolidated statement of profit or loss and other comprehensive income. When the

Group’s share of losses in an associate equals or exceeds its interest in the associate (which includes any

long-term interests that, in substance, form part of the Group’s net investment in the associate), the

Group does not recognise further losses, unless it has incurred obligations or made payments on behalf

of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of

those profits only after its share of the profits equals the share of losses not recognised.

The gain or loss on the disposal of an associate that results in a loss of significant influence represents

the difference between (i) the fair value of the consideration of the sale plus the fair value of any

investment retained in that associate and (ii) the Group’s entire carrying amount of that associate

(including goodwill) and any related accumulated foreign currency translation reserve. If an investment in

an associate becomes an investment in a joint venture, the Group continues to apply the equity method

and does not remeasure the retained interest.

Unrealised profits on transactions between the Group and its associates are eliminated to the extent of

the Group’s interests in the associates. Unrealised losses are also eliminated unless the transaction

provides evidence of an impairment of the asset transferred. Accounting policies of associates have been

changed where necessary to ensure consistency with the policies adopted by the Group.

(d) Foreign currency translation (i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the

currency of the primary economic environment in which the entity operates (the “functional

currency”). The consolidated financial statements are presented in Hong Kong dollars (“HK$”),

which is the Company’s functional and presentation currency.


89


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Foreign currency translation (Continued) (ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition

using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in

foreign currencies are translated at the exchange rates at the end of each reporting period. Gains

and losses resulting from this translation policy are recognised in profit or loss.

Non-monetary items that are measured at fair values in foreign currencies are translated using the

exchange rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any

exchange component of that gain or loss is recognised in other comprehensive income. When a

gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of

that gain or loss is recognised in profit or loss.

(iii) Translation on consolidationThe results and financial position of all the Group entities that have a functional currency different

from the Company’s presentation currency are translated into the Company’s presentation

currency as follows:

— Assets and liabilities for each statement of financial position presented are translated at the

closing rate at the date of that statement of financial position;

— Income and expenses are translated at average exchange rates for the period (unless this

average is not a reasonable approximation of the cumulative effect of the rates prevailing on

the transaction dates, in which case income and expenses are translated at the exchange

rates on the transaction dates); and

— All resulting exchange differences are recognised in other comprehensive income and

accumulated in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of monetary items that form

part of the net investment in foreign entities are recognised in other comprehensive income and

accumulated in the foreign currency translation reserve. When a foreign operation is sold, such

exchange differences are reclassified to consolidated profit or loss as part of the gain or loss on

disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as

assets and liabilities of the foreign entity and translated at the closing rate.


90


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (e) Property, plant and equipment

Property, plant and equipment are held for use in the production or supply of goods or services, or for

administrative purposes (other than construction in progress as described below), property, plant and

equipment are stated in the consolidated statement of financial position at cost, less subsequent

accumulated depreciation and subsequent accumulated impairment losses, if any.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to

the Group and the cost of the item can be measured reliably. All other repairs and maintenance are

recognised in profit or loss during the period in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less

their residual values over the estimated useful lives on a straight-line basis. The principal annual rates

are as follows:

Buildings 2%–4.5%

Leasehold improvements 20%–30%

Plant and machinery 9%–20%

Office equipment 15%–25%

Furniture and fixtures 10%–20%

Motor vehicles 10%–30%

The residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at

the end of each reporting period, with the effect of any changes in estimate accounted for on a

prospective basis.

Construction in progress represents buildings under construction and plant and equipment pending

installation and is stated at cost less impairment losses. Depreciation begins when the relevant assets are

available for use.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales

proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.


91


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (f) Leases

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract

is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a

period of time in exchange for consideration. Control is conveyed where the customer has both the

right to direct the use of the identified asset and to obtain substantially all of the economic benefits

from that use.

The Group as a lesseeWhere the contract contains lease component(s) and non-lease component(s), the Group has elected not

to separate non-lease components and accounts for each lease component and any associated non-lease

components as a single lease component for all leases.

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except

for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When

the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise

the lease on a lease-by-lease basis. The lease payments associated with those leases which are not

capitalised are recognised as an expense on a systematic basis over the lease term.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease

payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that

rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition,

the lease liability is measured at amortised cost and interest expense is calculated using the effective

interest method. Variable lease payments that do not depend on an index or rate are not included in

the measurement of the lease liability and hence are charged to profit or loss in the accounting period

in which they are incurred.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which

comprises the initial amount of the lease liability plus any lease payments made at or before the

commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use

assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the

underlying asset or the site on which it is located, discounted to their present value, less any lease

incentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciation

and impairment losses.

Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying

leased assets at the end of the lease term are depreciated from commencement date to the end of the

useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its

estimated useful life and the lease term.


92


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (f) Leases (Continued) The Group as a lessee (Continued)

Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair value.

Adjustments to fair value at initial recognition are considered as additional lease payments and included

in the cost of right-of-use assets.

The lease liability is remeasured when there is a change in future lease payments arising from a change

in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable

under a residual value guarantee, or there is a change arising from the reassessment of whether the

Group will be reasonably certain to exercise a purchase, extension or termination option. When the

lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of

the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has

been reduced to zero.

The lease liability is also remeasured when there is a change in the scope of a lease or the

consideration for a lease that is not originally provided for in the lease contract (“lease modification”)

that is not accounted for as a separate lease. In this case the lease liability is remeasured based on the

revised lease payments and lease term using a revised discount rate at the effective date of the

modification.

(g) Intangible assets (i) Mining rights

Mining rights acquired by the Group are stated at cost less accumulated amortisation and

impairment losses.

Subsequent expenditure on mining rights is capitalised only when it increases the future economic

benefits embodied in the specific assets to which it relates. All other expenditure is expensed as

incurred.

Amortisation is charged to the statement of profit or loss on a straight-line basis over the

estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an

indefinite useful life are tested for impairment at the end of each reporting period.


93


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (g) Intangible assets (Continued) (ii) Exploration and evaluation assets

Exploration and evaluation activity involves the search for mineral resources, the determination of

technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation expenditure comprises costs which are directly attributable to:

— researching and analysing historical exploration data;

— gathering exploration data through topographical, geochemical and geophysical studies;

— exploratory drilling, trenching and sampling;

— determining and examining the volume and grade of the resource;

— surveying transportation and infrastructure requirements; and

— conducting market and finance studies.

Expenditure during the initial exploration stage of a project is charged to profit or loss as incurred.

Exploration and evaluation assets are recognised at cost on initial recognition. Subsequent to initial

recognition, exploration and evaluation assets are stated at cost less any accumulated impairment

losses. Exploration and evaluation costs, including the costs of acquiring licenses, are capitalised as

exploration and evaluation assets on a project-by-project basis pending determination of the

technical feasibility and commercial viability of the project.

The capitalised costs are presented as either tangible or intangible exploration and evaluation

assets according to the nature of the assets. Tangible and intangible exploration and evaluation

assets that are available for use are depreciated/amortised over their useful lives. When a project is

abandoned, the related irrecoverable costs are written off to profit or loss immediately.

(h) InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined using the

weighted average basis. The cost of finished goods and work in progress comprises raw materials, direct

labour and an appropriate proportion of all production overhead expenditure, and where appropriate,

subcontracting charges. Net realisable value is the estimated selling price in the ordinary course of

business, less the estimated costs of completion and the estimated costs necessary to make the sale.


94


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (i) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position

when the Group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are

directly attributable to the acquisition or issue of financial assets and financial liabilities (other than

financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss

are recognised immediately in profit or loss.

The Group derecognises a financial asset only when the contractual rights to the cash flows from the

asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the

risks and rewards of ownership and continues to control the transferred asset, the Group recognises its

retained interest in the asset and an associated liability for amounts it may have to pay. If the Group

retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group

continues to recognise the financial asset and also recognises a collateralised borrowing for the

proceeds received.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or have expired. The difference between the carrying amount of the financial

liability derecognised and the consideration paid and payable, including any non-cash assets transferred

or liabilities assumed, is recognised in profit or loss.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is

a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net

basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be

contingent on future events and must be enforceable in the normal course of business and in the event

of default, insolvency or bankruptcy of the company or the counterparty.

(j) Financial assetsAll regular way purchases or sales of financial assets are recognised and derecognised on a trade date

basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of

assets within the time frame established by regulation or convention in the marketplace. All recognised

financial assets are measured subsequently in their entirety at either amortised cost or fair value,

depending on the classification of the financial assets.


95


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (j) Financial assets (Continued) Debt investments

Debt investments held by the Group are classified into one of the following measurement categories:

— amortised cost, if the investment is held for the collection of contractual cash flows which represent

solely payments of principal and interest. Interest income from the investment is calculated using

the effective interest method.

— FVTOCI — recycling, if the contractual cash flows of the investment comprise solely payments of

principal and interest and the investment is held within a business model whose objective is

achieved by both the collection of contractual cash flows and sale. Changes in fair value are

recognised in other comprehensive income, except for the recognition in profit or loss of expected

credit losses, interest income (calculated using the effective interest method) and foreign exchange

gains and losses. When the investment is derecognised, the amount accumulated in other

comprehensive income is recycled from equity to profit or loss.

— FVTPL if the investment does not meet the criteria for being measured at amortised cost or FVTOCI

(recycling). Changes in the fair value of the investment (including interest) are recognised in profit

or loss.

Equity investmentsAn investment in equity securities is classified as FVTPL unless the equity investment is not held for

trading purposes and on initial recognition of the investment the Group makes an election to designate

the investment at FVTOCI (non-recycling) such that subsequent changes in fair value are recognised in

other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may

only be made if the investment meets the definition of equity from the issuer’s perspective. Where such

an election is made, the amount accumulated in other comprehensive income remains in the fair value

reserve (non-recycling) until the investment is disposed of. At the time of disposal, the amount

accumulated in the fair value reserve (non-recycling) is transferred to retained earnings. It is not recycled

through profit or loss. Dividends from an investment in equity securities, irrespective of whether

classified as at FVTPL or FVTOCI, are recognised in profit or loss as other income.

(k) Trade and other receivablesA receivable is recognised when the group has an unconditional right to receive consideration. A right

to receive consideration is unconditional if only the passage of time is required before payment of that

consideration is due. If revenue has been recognised before the group has an unconditional right to

receive consideration, the amount is presented as a contract asset.

Receivables are stated at amortised cost using the effective interest method less allowance for credit

losses.


96


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other

financial institutions, and short-term, highly liquid investments that are readily convertible into known

amounts of cash and which are subject to an insignificant risk of changes in value, having been within

three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an

integral part of the group’s cash management are also included as a component of cash and cash

equivalents for the purpose of the consolidated cash flow statement. Cash and cash equivalents are

assessed for ECL.

(m) Discontinued operationsA discontinued operation is a component of the Group (i.e. the operations and cash flows of which can

be clearly distinguished from the rest of the Group) that either has been disposed of, or is classified as

held for sale, and which represents a separate major line of business or geographical area of operations,

or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical

area of operations, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the component meets the

criteria to be classified as held for sale in accordance with IFRS 5, if earlier. It also occurs when the

component is abandoned.

When an operation is classified as discontinued, a single amount is presented in the statement of profit

or loss, which comprises:

— The post-tax profit or loss of the discontinued operation; and

— The post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the

disposal, of the assets or disposal group constituting the discontinued operation.

(n) Financial liabilities and equity instrumentsFinancial liabilities and equity instruments are classified according to the substance of the contractual

arrangements entered into and the definitions of a financial liability and an equity instrument under

IFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Group

after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and

equity instruments are set out below.

(o) BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently

measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer

settlement of the liability for at least 12 months after the reporting period.


97


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (p) Redeemable convertible preference shares

Redeemable convertible preference shares which entitle the holder to convert the loans into equity

instruments, other than into a fixed number of equity instruments at a fixed conversion price, are

regarded as combined instruments consisting of a liability and a derivative component. At the date of

issue, the fair value of the derivative component is determined using an option pricing model; this

amount is carried as a derivative liability that is subsequently measured at fair value through profit or

loss until extinguished on conversion or redemption. The remainder of the proceeds is allocated to the

liability component and is carried as a liability at amortised cost using the effective interest method until

extinguished on conversion or redemption.

Transaction costs are apportioned between the liability and derivative components of the redeemable

convertible preference shares based on the allocation of proceeds to the liability and derivative

components on initial recognition. The portion related to the derivative component is expensed

immediately.

(q) Trade and other payablesTrade and other payables are recognised initially at their fair value and subsequently measured at

amortised cost using the effective interest method unless the effect of discounting would be immaterial,

in which case they are stated at cost.

(r) Equity instrumentsAn equity instrument is any contract that evidence a residual interest in the assets of an entity after

deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds

received, net of direct issue costs.

(s) Revenue and other incomeRevenue is recognised when control over a product or service is transferred to the customer, at the

amount of promised consideration to which the Group is expected to be entitled, excluding those

amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and

is after deduction of any trade discounts.

Revenue from the production and exploitation of coal, sales of manufactured mining and metallurgical

machineries products, sales of electronic products and provision of supply chain management services for

mineral business are recognised when control of the goods has transferred, being when the goods have

been delivery to the customer’s specific location (delivery). Following delivery, the customer has full

discretion over the manner of distribution and price to sell the goods, has the primary responsibility

when on selling the goods and bears the risks of obsolescence and loss in relation to the goods. A

receivable is recognised by the Group when the goods are delivered to the customer as this represents

the point in time at which the right to consideration becomes unconditional, as only the passage of time

is required before payment is due.


98


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (s) Revenue and other income (Continued)

The Group organises eSports events and provides events management services and corporate services.

Revenues are recognised over time where the customer simultaneously receives and consumes the

benefits provided by the Group as the Group performs. Revenue from such services are recognised

based on the stage of completion of the contract. Payment for provision of services are not due from

the customers until the services are completed and therefore a contract asset is recognised over the

period in which the services are performed representing the entity’s right to consideration for the

services performed to date. Otherwise revenue were recognised at a point in time.

Revenue from logistics services for mineral business and trust and trustee services are recognised when

the services are rendered.

Media production services income is recognised when the services are rendered or on the date of the

relevant production is delivered.

Interest income is recognised as it accrues using the effective interest method. For financial assets

measured at amortised cost or FVTOCI (recycling) that are not credit-impaired, the effective interest rate

is applied to the gross carrying amount of the asset. For credit impaired financial assets, the effective

interest rate is applied to the amortised cost (i.e. gross carrying amount net of loss allowance) of the

asset.

Dividend income is recognised when the shareholders’ rights to receive payment are established.

(t) Employee benefits (i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to

employees. A provision is made for the estimated liability for annual leave and long service leave

as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligationsThe Group contributes to defined contribution retirement schemes which are available to all

employees. Contributions to the schemes by the Group and employees are calculated as a

percentage of employees’ basic salaries. The retirement benefit scheme cost charged to profit or

loss represents contributions payable by the Group to the funds.

(iii) Termination benefitsTermination benefits are recognised at the earlier of the dates when the Group can no longer

withdraw the offer of those benefits, and when the Group recognises restructuring costs and

involves the payment of termination benefits.


99


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (u) Share-based payments

The Group issues equity-settled share-based payments to certain directors, employees and consultants.

Equity-settled share-based payments to directors and employees are measured at the fair value

(excluding the effect of non-market based vesting conditions) of the equity instruments at the date of

grant. The fair value determined at the grant date of the equity-settled share-based payments is

expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that

will eventually vest and adjusted for the effect of non-market based vesting conditions.

Equity-settled share-based payments to consultants are measured at the fair value of the services

rendered or, if the fair value of the services rendered cannot be reliably measured, at the fair value of

the equity instruments granted. The fair value is measured at the date the Group receives the services

and is recognised as an expense.

(v) Borrowing costsAll borrowing costs are recognised in profit or loss in the period in which they are incurred.

(w) Government grantsA government grant is recognised when there is reasonable assurance that the Group will comply with

the conditions attaching to it and that the grant will be received.

Government grants that become receivable as compensation for expenses or losses already incurred or

for the purpose of giving immediate financial support to the Group with no future related costs are

recognised in profit or loss in the period in which they become receivable.

(x) TaxationIncome tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit

recognised in profit or loss because of items of income or expense that are taxable or deductible in

other years and items that are never taxable or deductible. The Group’s liability for current tax is

calculated using tax rates that have been enacted or substantively enacted by the end of the reporting

period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the

consolidated financial statements and the corresponding tax bases used in the computation of taxable

profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred

tax assets are recognised to the extent that it is probable that taxable profits will be available against

which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such

assets and liabilities are not recognised if the temporary difference arises from goodwill or from the

initial recognition (other than in a business combination) of other assets and liabilities in a transaction

that affects neither the taxable profit nor the accounting profit.


100


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (x) Taxation (Continued)

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in

subsidiaries and associates except where the Group is able to control the reversal of the temporary

difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced

to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or

part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by

the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to

items recognised in other comprehensive income or directly in equity, in which case the deferred tax is

also recognised in other comprehensive income or directly in equity.

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow

from the manner in which the Group expects, at the end of the reporting period, to recover or settle

the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax for leasing transactions in which the Group recognises the

right-of-use assets and the related lease liabilities, the Group first determines whether the tax

deductions are attributable to the right-of-use assets or the lease liabilities.

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group

applies IAS 12 requirements to right-of-use assets and lease liabilities separately. Temporary differences

relating to right-of-use assets and lease liabilities are not recognised at initial recognition and over the

lease terms due to application of the initial recognition exemption.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current

tax assets against current tax liabilities and when they relate to income taxes levied by the same

taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that

the relevant tax authority will accept the uncertain tax treatment used, or proposed to be use by

individual group entities in their income tax filings. If it is probable, the current and deferred taxes are

determined consistently with the tax treatment in the income tax filings. If it is not probable that the

relevant taxation authority will accept an uncertain tax treatment, the effect of each uncertainty is

reflected by using either the most likely amount or the expected value.


101


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (y) Impairment of non-financial assets

Intangible assets that are not yet available for use are reviewed for impairment annually and whenever

events or changes in circumstances indicate the carrying amount may not be recoverable.

The carrying amounts of non-financial assets are reviewed at each reporting date for indications of

impairment and where an asset is impaired, it is written down as an expense through the consolidated

statement of profit or loss to its estimated recoverable amount. The recoverable amount is determined

for an individual asset, unless the asset does not generate cash inflows that are largely independent of

those from other assets or groups of assets. If this is the case, recoverable amount is determined for the

cash-generating unit to which the asset belongs. Recoverable amount is the higher of value in use and

the fair value less costs of disposal of the individual asset or the cash-generating unit.

Value in use is the present value of the estimated future cash flows of the asset/cash-generating unit.

Present values are computed using pre-tax discount rates that reflect the time value of money and the

risks specific to the asset/cash-generating unit whose impairment is being measured.

Impairment losses for cash-generating units are allocated first against the goodwill of the unit and then

pro rata amongst the other assets of the cash-generating unit. Subsequent increases in the recoverable

amount caused by changes in estimates are credited to profit or loss to the extent that they reverse the

impairment.

(z) Impairment of financial assetsThe Group recognises a loss allowance for expected credit losses on investments in debt instruments

that are measured at amortised cost or at FVTOCI, trade and other receivables. The amount of expected

credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of

the respective financial instrument.

The Group always recognises lifetime ECL for trade receivables. The expected credit losses on these

financial assets are estimated using a provision matrix based on the Group’s historical credit loss

experience, adjusted for factors that are specific to the debtors, general economic conditions and an

assessment of both the current as well as the forecast direction of conditions at the reporting date,

including time value of money where appropriate.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant

increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has

not increased significantly since initial recognition, the Group measures the loss allowance for that

financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over

the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime

ECL that is expected to result from default events on a financial instrument that are possible within 12

months after the reporting date.


102


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (z) Impairment of financial assets (Continued) Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial

recognition, the Group compares the risk of a default occurring on the financial instrument at the

reporting date with the risk of a default occurring on the financial instrument at the date of initial

recognition. In making this assessment, the Group considers both quantitative and qualitative

information that is reasonable and supportable, including historical experience and forward-looking

information that is available without undue cost or effort. Forward-looking information considered

includes the future prospects of the industries in which the Group’s debtors operate, obtained from

economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar

organisations, as well as consideration of various external sources of actual and forecast economic

information that relate to the Group’s core operations.

In particular, the following information is taken into account when assessing whether credit risk has

increased significantly since initial recognition:

— an actual or expected significant deterioration in the financial instrument’s external (if available) or

internal credit rating;

— significant deterioration in external market indicators of credit risk for a particular financial

instrument;

— existing or forecast adverse changes in business, financial or economic conditions that are expected

to cause a significant decrease in the debtor’s ability to meet its debt obligations;

— an actual or expected significant deterioration in the operating results of the debtor;

— significant increases in credit risk on other financial instruments of the same debtor;

— an actual or expected significant adverse change in the regulatory, economic, or technological

environment of the debtor that results in a significant decrease in the debtor’s ability to meet its

debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a

financial asset has increased significantly since initial recognition when contractual payments are more

than 30 days past due, unless the Group has reasonable and supportable information that demonstrates

otherwise.


103


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (z) Impairment of financial assets (Continued) Significant increase in credit risk (Continued)

Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not

increased significantly since initial recognition if the financial instrument is determined to have low credit

risk at the reporting date. A financial instrument is determined to have low credit risk if:

(i) the financial instrument has a low risk of default,

(ii) the debtor has a strong capacity to meet its contractual cash flow obligations in the near term, and

(iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily,

reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Group considers a financial asset to have low credit risk when the asset has external credit rating of

“investment grade” in accordance with the globally understood definition or if an external rating is not

available, the asset has an internal rating of “performing”. Performing means that the counterparty has

a strong financial position and there is no past due amounts.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a

significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable

of identifying significant increase in credit risk before the amount becomes past due.

Definition of defaultThe Group considers the following as constituting an event of default for internal credit risk

management purposes as historical experience indicates that receivables that meet either of the

following criteria are generally not recoverable.

— when there is a breach of financial covenants by the counterparty; or

— information developed internally or obtained from external sources indicates that the debtor is

unlikely to pay its creditors, including the Group, in full (without taking into account any

collaterals held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset

is more than 90 days past due unless the Group has reasonable and supportable information to

demonstrate that a more lagging default criterion is more appropriate.


104


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (z) Impairment of financial assets (Continued) Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the

estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is

credit-impaired includes observable data about the following events:

— significant financial difficulty of the issuer or the counterparty;

— a breach of contract, such as a default or past due event;

— the lender(s) of the counterparty, for economic or contractual reasons relating to the counterparty’s

financial difficulty, having granted to the counterparty a concession(s) that the lender(s) would not

otherwise consider; or

— it is becoming probable that the counterparty will enter bankruptcy or other financial reorganisation;

or

— The disappearance of an active market for that financial asset because of financial difficulties.

Write-off policyThe Group writes off a financial asset when there is information indicating that the debtor is in severe

financial difficulty and there is no realistic prospect of recovery, including when the debtor has been

placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables,

when the amounts are over two years past due, whichever occurs sooner. Financial assets written off

may still be subject to enforcement activities under the Group’s recovery procedures, taking into account

legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Measurement and recognition of ECLThe measurement of expected credit losses is a function of the probability of default, loss given default

(i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the

probability of default and loss given default is based on historical data adjusted by forward-looking

information as described above. As for the exposure at default, for financial assets, this is represented

by the assets’ gross carrying amount at the reporting date.

For financial assets, the expected credit loss is estimated as the difference between all contractual cash

flows that are due to the Group in accordance with the contract and all the cash flows that the Group

expects to receive, discounted at the original effective interest rate.


105


4. SIGNIFICANT ACCOUNTING POLICIES (Continued) (z) Impairment of financial assets (Continued) Measurement and recognition of ECL (Continued)

If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime

ECL in the previous reporting period, but determines at the current reporting date that the conditions

for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to

12-month ECL at the current reporting date, except for assets for which simplified approach was used.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a

corresponding adjustment to their carrying amount through a loss allowance account, except for

investments in debt instruments that are measured at FVTOCI, for which the loss allowance is

recognised in other comprehensive income and accumulated in the investment revaluation reserve, and

does not reduce the carrying amount of the financial asset in the statement of financial position.

(aa) Provisions and contingent liabilitiesProvisions are recognised for liabilities of uncertain timing or amount when the Group has a present

legal or constructive obligation arising as a result of a past event, it is probable that an outflow of

economic benefits will be required to settle the obligation and a reliable estimate can be made. Where

the time value of money is material, provisions are stated at the present value of the expenditures

expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot

be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of

outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or

non-occurrence of one or more future events are also disclosed as contingent liabilities unless the

probability of outflow is remote.

(bb) Events after the reporting periodEvents after the reporting period that provide additional information about the Group’s position at the

end of the reporting period or those that indicate the going concern assumption is not applicable are

adjusting events and are reflected in the consolidated financial statements. Events after the reporting

period that are not adjusting events are disclosed in the notes to the consolidated financial statements

when material.


106


5. CRITICAL JUDGEMENTS AND KEY ESTIMATES Critical judgements in applying accounting policies

In the process of applying the accounting policies, the directors have made the following judgements that

have the most significant effect on the amounts recognised in the consolidated financial statements (apart

from those involving estimations, which are dealt with below).

(a) Going concern basisThese consolidated financial statements have been prepared on a going concern basis, the validity of

which depends upon the financial support of the substantial shareholder of the Company at a level

sufficient to finance the working capital requirements of the Group. Details are explained in note 2 to

the consolidated financial statements.

(b) Significant increase in credit riskECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL for stage

2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since

initial recognition. IFRS 9 does not define what constitutes a significant increase in credit risk. In

assessing whether the credit risk of an asset has significantly increased the Group takes into account

qualitative and quantitative reasonable and supportable forward looking information.

Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the

reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year, are discussed below.

(a) Impairment of property, plant and equipment and right-of-use assetsProperty, plant and equipment and right-of-use assets are stated at costs less accumulated depreciation

and impairment, if any. In determining whether an asset is impaired, the Group has to exercise

judgment and make estimation, particularly in assessing: (1) whether an event has occurred or any

indicators that may affect the asset value; (2) whether the carrying value of an asset can be supported

by the recoverable amount, in the case of value in use, the net present value of future cash flows which

are estimated based upon the continued use of the asset; and (3) the appropriate key assumptions to be

applied in estimating the recoverable amounts including cash flow projections and an appropriate

discount rate. When it is not possible to estimate the recoverable amount of an individual asset

(including right-of-use assets), the Group estimates the recoverable amount of the cash-generating unit

to which the assets belongs. Changing the assumptions and estimates, including the discount rates or

the growth rate in the cash flow projections, could materially affect the recoverable amounts.

The carrying amount of property, plant and equipment and right-of-use assets as at 31 December 2020

were approximately HK$12,650,000 (2019: HK$22,633,000) and HK$15,490,000 (2019: HK$17,521,000)

respectively.


107


5. CRITICAL JUDGEMENTS AND KEY ESTIMATES (Continued) Key sources of estimation uncertainty (Continued) (b) Impairment of intangible assets

The Group assesses whether there are any indicators of impairment for intangible assets at the end of

each reporting period. Intangible assets are tested for impairment when there are indicators that the

carrying amounts may not be recoverable. When value in use calculations are undertaken, the directors

must estimate the expected future cash flows from the assets or cash-generating unit and choose a

suitable discount rate in order to calculate the present value of those cash flows. The carrying amount

of intangible assets at the end of the reporting period was approximately HK$166,398,000 (2019:

HK$114,099,000). Details of the impairment losses calculation are provided in note 21 to the


(c) Impairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-

generating unit to which goodwill has been allocated. The value in use calculation requires the Group to

estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount

rate in order to calculate the present value. Where the actual future cash flows are less than the

expected, or change in facts and circumstances which results in downward revision of future cash flows

or upward revision of discount rate, a material impairment loss or further impairment loss may arise.

Furthermore, the estimated cash flows and discount rate are subject to higher degree of estimation

uncertainties in the current year due to uncertainty on how the COVID-19 pandemic may progress and

evolve and volatility in financial markets, including potential disruptions of the Group’s advertising and

public relationship events business.

The carrying amount of goodwill at the end of the reporting period was HK$Nil after an impairment loss

of approximately HK$1,118,000 was recognised during the year. Details of the impairment loss

calculation are provided in note 20 to the consolidated financial statements.

(d) Impairment of trade receivablesThe management of the Group estimates the amount of impairment loss for ECL on trade receivables

based on the credit risk of trade receivables. The amount of the impairment loss based on ECL model is

measured as the difference between all contractual cash flows that are due to the Group in accordance

with the contract and all the cash flows that the Group expects to receive, discounted at the effective

interest rate determined at initial recognition. Where the future cash flows are less than expected, or

being revised downward due to changes in facts and circumstances, a material impairment loss may

arise.

As at 31 December 2020, the carrying amount of trade receivables was approximately HK$26,643,000

(net of allowance for doubtful debts of approximately HK$46,310,000 (2019: HK$26,615,000 (net of

allowance for doubtful debts of HK$41,351,000)).


108


5. CRITICAL JUDGEMENTS AND KEY ESTIMATES (Continued) Key sources of estimation uncertainty (Continued) (e) Allowance for slow-moving inventories

Allowance for slow-moving inventories is made based on the ageing and estimated net realisable value

of inventories. The assessment of the allowance amount involves judgement and estimates. Where the

actual outcome in future is different from the original estimate, such difference will impact the carrying

value of inventories and allowance charge/write-back in the period in which such estimate has been

changed. No allowance for slow-moving inventories was made for the year ended 31 December 2020

(2019: Nil).

(f) Fair value of investmentsIn the absence of quoted market prices in an active market, the directors estimate the fair value of the

Group’s investment, details of which are set out in note 23 to the consolidated financial statements, by

considering information from a variety of sources, including the latest published financial information,

the historical data on market volatility as well as the price and industry and sector performance of each

investments.

The carrying amount of the investment as at 31 December 2020 was approximately HK$19,100,000

(2019: HK$19,100,000).

6. FINANCIAL RISK MANAGEMENTThe Group’s activities expose it to a variety of financial risks: foreign currency risk, price risk, credit risk,

liquidity risk and interest rate risk. The Group’s overall risk management programme focuses on the

unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial

performance.

(a) Foreign currency riskThe Group has minimal exposure to foreign currency risk as most of its business transactions, assets and

liabilities are principally denominated in HK$, United States dollars (“US$”), Renminbi (“RMB”), Euro

(“EUR”) and Tajikistan Somoni (“TJS”). The Group currently does not have a foreign currency hedging

policy in respect of foreign currency transactions, assets and liabilities. The Group monitors its foreign

currency exposure closely and will consider hedging significant foreign currency exposure should the

need arise.

At 31 December 2020, if the HK$ had weakened/strengthened 6 per cent (2019: 0.5 per cent) against

RMB with all other variables held constant, consolidated loss after tax for the year would have been

approximately HK$1,778,000 higher/lower (2019: HK$153,000 lower/higher), arising mainly as a result of

the foreign exchange loss/gain on trade and other payables denominated in RMB (2019: foreign

exchange gain/loss on bank and cash balances and other receivables denominated in RMB).

The directors of the Company consider that the foreign currency exposure in respect of EUR, US$ and

TJS for the years ended 31 December 2020 and 2019 are insignificant to the Group and therefore no

sensitivity analysis is presented thereon.


109


6. FINANCIAL RISK MANAGEMENT (Continued) (b) Price risk

The Group is exposed to equity price risk mainly through its investment in equity securities. The

management manages this exposure by maintaining a portfolio of investments with different risk and

return profiles. The Group’s equity price risk is mainly concentrated on equity securities quoted on the

Stock Exchange.

The sensitivity analysis below has been determined based on the exposure to equity price risk at the end

of the reporting period.

If equity prices had been 10% (2019: 10%) higher/lower consolidated loss after tax for the year ended

31 December 2020 would decrease/increase by approximately HK$3,629,000 (2019: HK$5,249,000

decrease/increase). This is mainly due to the changes in fair value of financial assets at fair value

through profit or loss.

(c) Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or

customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating

activities (primarily trade receivables) and from its financing activities, including deposits with banks and

financial institutions, foreign exchange transactions and other financial instruments. The Group’s

exposure to credit risk arising from cash and cash equivalents is limited because the counterparties are

banks and financial institutions with high credit-rating assigned by international credit-rating agencies,

for which the Group considers to have low credit risk.

Trade receivablesCustomer credit risk is managed by each business unit subject to the Group’s established policy,

procedures and control relating to customer credit risk management. Individual credit evaluations are

performed on all customers requiring credit over a certain amount. These evaluations focus on the

customer’s past history of making payments when due and current ability to pay, and take into account

information specific to the customer as well as pertaining to the economic environment in which the

customer operates. The credit terms of trade receivables are in accordance with specific payment

schedules agreed with various customers. Debtors with balances that past due are requested to settle all

outstanding balances before any further credit is granted. Normally, the Group does not obtain

collateral from customers.

The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is

calculated using a provision matrix on individual segment. As the Group’s historical credit loss

experience does not indicate significantly different loss patterns for different customer segments, the loss

allowance based on past due status is not further distinguished between the Group’s different customer

bases. The ECL on trade receivables are estimated using a simplified method. The Group has assessed

that the ECL for trade receivables based on individually significant customer or ageing of customers

collectively that are not individually significant.


110


6. FINANCIAL RISK MANAGEMENT (Continued) (c) Credit risk (Continued) Trade receivables (Continued)

The following table provides information about the Group’s exposure to credit risk for accounts

receivables arising from different segments of the Group as at 31 December 2020 and 2019.

2020

Expected loss

rate

Gross carrying

amount

Loss

allowance

% HK$’000 HK$’000

Coal mining business segment

Current (not past due) 1.46% 12,885 188

0–30 days past due 1.43% 189 3

31–60 days past due 1.71% 129 2

61–90 days past due 4.39% 549 24

91 days–1 year past due 17.66% 7,942 1,403

1–2 years past due 40.37% 10,581 4,272

2–3 years past due 100% 29,261 29,261

Over 3 years past due 100% 11,157 11,157

Consulting and media service business

segment

0–30 days past due — 11 —


Corporate and investment business

segment

Current (not past due) — 120 —


91 days–1 year past due — 107 —

72,953 46,310


111



2019

Expected

loss rate

Gross carrying

amount Loss allowance

% HK$’000 HK$’000

(Re-presented) (Re-presented)


Current (not past due) 1.17% 10,227 120

0–30 days past due 1.17% 688 8

31–60 days past due 2.16% 475 10

61–90 days past due 3.57% 112 4

91 days–1 year past due 12.13% 11,057 1,341

1–2 years past due 85.60% 32,226 27,585

2–3 years past due 100% 3,194 3,194

More than 3 years 100% 9,082 9,082

Consulting and media service business

segment

0–30 days past due 1.57% 15 —*

Corporate and investment business

segment

0–30 days past due 0.79% 652 5

31–60 days past due 0.79% 8 —*

61–90 days past due 0.79% 230 2

67,966 41,351

* Represents the amount less than HK$1,000


112



Expected loss rates are based on actual loss experience over the past 5 years (2019: 4 years). These

rates are adjusted to reflect differences between economic conditions during the period over which the

historic data has been collected, current conditions and the Group’s view of economic conditions over

the expected lives of the receivables.

Movement in the loss allowance account for trade receivables during the year is as follows:

2020 2019

HK$’000 HK$’000

At 1 January 41,351 813

Impairment losses recognised for the year 5,358 40,798

Reversals (1,706) —

Exchange differences 1,307 (260)

At 31 December 46,310 41,351

During the year, the increase in gross amount of trade receivables past due over 1 year of

approximately HK$6,497,000 resulted in an increase in loss allowance of approximately HK$4,829,000.

Financial assets at FVTOCI and amortised costAll of the Group’s assets at FVTOCI and amortised cost are considered to have low credit risk, except

for the trade deposit paid, and the loss allowance recognised during the period was therefore limited to

12-month expected losses. Other instruments are considered to be low credit risk when they have a low

risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the

near term.

Financial assets at amortised cost include trade deposit placed with suppliers, utilities and other deposit,

transportation fee receivables and other receivables.


113


6. FINANCIAL RISK MANAGEMENT (Continued) (c) Credit risk (Continued) Financial assets at FVTOCI and amortised cost (Continued)

Movement in the loss allowance for financial assets at amortised cost during the year is as follows:

Trade deposits

placed with

suppliers

Utilities and

other deposits

Transportation

fee receivables

Other

receivables Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2019 44,331 1 1,356 88,602 134,290

Impairment losses recognised for the year 16,027 5 15,565 41,769 73,366

Written off — — — (19,020) (19,020)

Exchange difference (2) — — (670) (672)

At 31 December 2019 and

1 January 2020 60,356 6 16,921 110,681 187,964

Impairment losses recognised for the year — — — 1,368 1,368

Reversal for the year (200) — — (58) (258)

Written off — — — (1,779) (1,779)

Exchange difference 1,314 — 1,019 2,865 5,198

At 31 December 2020 61,470 6 17,940 113,077 192,493

(d) Liquidity riskThe Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it

maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.


114


6. FINANCIAL RISK MANAGEMENT (Continued) (d) Liquidity risk (Continued)

The maturity analysis based on contractual undiscounted cash flows of the Group’s non-derivative

financial liabilities is as follows:

Carrying amount

Total contractual

undiscounted cash outflow

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years Over 5 years

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 December 2020Trade payables 5,312 5,312 5,312 — — —

Other payables and accruals 130,423 130,423 130,423 — — —

Bonds payables 50,000 50,000 50,000 — — —

Lease liabilities 2,621 2,806 1,346 1,460 — —

Redeemable convertible preference shares 525 541 541 — — —

At 31 December 2019Trade payables 4,478 4,478 4,478 — — —

Other payables and accruals 47,428 47,428 47,428 — — —

Bonds payables (note) 50,000 50,000 50,000 — — —

Lease liabilities 4,861 5,329 1,979 1,666 1,684 —

Redeemable convertible preference shares 511 541 — 541 — —

Note:

Bonds payables with a repayment on demand clause after twelve months of issue date are included in the less than 1 year’s time

band in the above maturity analysis. As at 31 December 2019, the aggregate undiscounted principal amounts of these bonds

payables amounted to HK$50,000,000. Taking into account the Group’s financial position, the directors do not believe that it is

probable that the bondholders will exercise their discretionary rights to demand immediate repayment. The directors believe that such

bonds payables will be repaid within one year after issue date in accordance with the scheduled repayment dates set out in the bond

subscription agreements. At that time, the aggregate principal and interest cash outflows will amount to HK$58,000,000.

(e) Interest rate riskThe Group’s exposure to interest rate risk arises from its bank deposits and borrowings. The Group’s

bank deposits bear interests at variable rates varied with the then prevailing market condition. The

Group’s borrowings bear interests at fixed interest rates and therefore are subject to fair value interest

rate risks.

At 31 December 2020, if interest rates at that date had been 10 basis points lower with all other

variables held constant, consolidated loss after tax for the year would have been approximately

HK$20,000 (2019: HK$25,000) higher, arising mainly as a result of lower interest income on bank

deposits. If interest rates had been 50 basis points higher, with all other variables held constant,

consolidated loss after tax for the year would have been approximately HK$101,000 (2019: HK$123,000)

lower, arising mainly as a result of higher interest income on bank deposits.


115


6. FINANCIAL RISK MANAGEMENT (Continued) (f) Categories of financial instruments at 31 December 2020

2020 2019

HK$’000 HK$’000

Financial assets

Financial assets measured at FVTOCI:

Equity instruments 19,100 19,100

Financial assets at FVTPL:

Mandatorily measured at FVTPL

Held for trading 36,293 52,489

Financial assets measured at amortised cost 66,293 68,954

Financial liabilities

Financial liabilities at amortised cost 186,260 102,417

Financial liabilities at FVTPL 36,664 43,011

(g) Fair valuesThe carrying amounts of the Group’s financial assets and financial liabilities as reflected in the

consolidated statement of financial position approximate their respective fair values.

7. FAIR VALUE MEASUREMENTSFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The following disclosures of fair value

measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques

used to measure fair value:

Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group

can access at the measurement date.

Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or

liability, either directly or indirectly.

Level 3 inputs: unobservable inputs for the asset or liability.

The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of

the event or change in circumstances that caused the transfer.


116


7. FAIR VALUE MEASUREMENTS (Continued) (a) Disclosures of level in fair value hierarchy at 31 December:

Fair value measurements using: Total

Description Level 1 Level 3 2020

HK$’000 HK$’000 HK$’000

Recurring fair value measurements:

Financial assets

Financial assets at FVTPL

Listed equity securities 36,293 — 36,293


Unlisted equity securities — 19,100 19,100

Total 36,293 19,100 55,393



Financial liabilities at FVTPL — 36,664 36,664

Fair value measurements using: Total

Description Level 1 Level 3 2019

HK$’000 HK$’000 HK$’000


Financial assets

Financial assets at FVTPL

Listed equity securities 52,489 — 52,489


Unlisted equity securities — 19,100 19,100

Total 52,489 19,100 71,589



Financial liabilities at FVTPL — 43,011 43,011


117


7. FAIR VALUE MEASUREMENTS (Continued) (b) Reconciliation of assets measured at fair value based on level 3:

2020 2019

HK$’000 HK$’000

Financial assets at FVTOCI — Unlisted equity securities

At 1 January 19,100 25,900

Purchases — 1,000

Fair value loss — (7,800)

At 31 December 19,100 19,100

The total gains or losses recognised in other comprehensive income are presented in fair value changes

of equity investments at FVTOCI in the consolidated statement of profit or loss and other comprehensive

income.

(c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements at 31 December 2020:The Group’s financial controller is responsible for the fair value measurements of assets and liabilities

required for financial reporting purposes, including level 3 fair value measurements. The financial

controller reports directly to the Board of Directors for these fair value measurements. Discussions of

valuation processes and results are held between the financial controller and the Board of Directors at

least twice a year.

For level 3 fair value measurements, the Group will normally engage external valuation experts with the

recognised professional qualifications and recent experience to perform the valuations.


118


7. FAIR VALUE MEASUREMENTS (Continued) (c) Disclosure of valuation process used by the Group and valuation techniques and inputs

used in fair value measurements at 31 December 2020: (Continued) Level 3 fair value measurements

Fair value

DescriptionValuation technique Unobservable inputs Range

Effect on fair value for increase of inputs 2020 2019

HK$’000 HK$’000Assets/

(Liabilities)Assets/

(Liabilities)

Private equity investments classified as financial assets at FVTOCI

Discounted cash flows

Weighted average cost of capital

14% (2019: 13%)

Decrease 10,900 10,900

Long-term revenue growth rate

2% (2019: 3%)

Increase

Long-term pre-tax operating margin

11% (2019: 14%)

Increase

Discount for lack of marketability

20.6% (2019: 20.6%)

Decrease

Redeemable preference shares of private entity classified as financial assets at FVTOCI


Discount rate 4.30% (2019: 4.44%)

Decrease 8,200 8,200

Financial liabilities at FVTPL


Risk- free rate 0.01%–0.08% (2019: 1.82%–1.83%)

Decrease (36,664) (43,011)

Dividend yield 0% (2019: 3.07%–3.67%)

Decrease

Volatility 40%–60% (2019: 35%–42%)

Decrease

During the two years, there were no changes in the valuation techniques used.


119


8. REVENUE Disaggregation of revenue

Disaggregation of revenue from contracts with customers by major products or service line for the year from

continuing operations is as follows:

2020 2019

HK$’000 HK$’000

Revenue from contracts with customers within the scope of

IFRS 15

Disaggregated by major products or service lines

Sales of goods:

— Provision of supply chain management services for mineral

business 4,813 83,964

— Mining and metallurgical machineries products 20,065 27,390

— Trading of electronic products — 7,154

Provision of services:

— Logistics services for mineral business 5,597 6,017

— Organising eSports events 421 1,140

— Corporate services business 1,792 2,679

— Media services 462 6,025

— Trust and trustee services 2,288 3,292

— Event management services 520 905

35,958 138,566


120


8.

REV

ENU

E (C

onti

nued

)

Dis

agg

reg

atio

n o

f re

ven

ue

(Con

tinu

ed)

The

Gro

up d

eriv

es r

even

ue f

rom

the

tra

nsfe

r of

goo

ds a

nd s

ervi

ces

over

tim

e an

d at

a p

oint

in

tim

e in

the

fol

low

ing

maj

or p

rodu

ct l

ines

and

geog

raph

ical

reg

ions

:

For t

he ye

ar en

ded 3

1 Dece

mber

Provis

ion of

supp

ly ch

ain

mana

geme

nt ser

vices

for

mine

ral bu

siness

Minin

g and

meta

llurgi

cal

mach

inerie

s prod

ucts

Tradin

g of e

lectro

nic

produ

cts

Logis

tics s

ervice

s for

mine

ral

busin

essOr

ganis

ing eS

ports

even

tCo

rporat

e serv

ices b

usine

ssMe

dia se

rvices

Trust

and t

rustee

servi

cesEv

ent m

anag

emen

t serv

ices

Total

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

HK$’0

00HK

$’000

Prima

ry ge

ograp

hical

marke

ts—

Hong

Kon

g—

15,15

2—

——

1,377

——

——

1,792

2,679

462

6,025

2,288

3,292

520

905

5,062

29,43

0—

PRC

excep

t Hon

g Kon

g4,8

1322

,867

20,06

527

,390

——

5,597

6,017

——

——

——

——

——

30,47

556

,274

— Au

stralia

——

——

—1,4

04—

——

515

——

——

——

——

—1,9

19—

Taiwa

n—

36,49

7—

——

——

——

——

——

——

——

——

36,49

7—

Vietna

m—

9,448

——

——

——

——

——

——

——

——

—9,4

48—

Duba

i—

——

——

4,373

——

421

——

——

——

——

—42

14,3

73—

Othe

rs—

——

——

——

——

625

——

——

——

——

—62

5

Reven

ue fr

om ex

terna

l cust

omers

4,813

83,96

420

,065

27,39

0—

7,154

5,597

6,017

421

1,140

1,792

2,679

462

6,025

2,288

3,292

520

905

35,95

813

8,566

Timing

of re

venu

e reco

gnitio

n

Produ

cts tr

ansfe

rred a

t a po

int in

time

4,813

83,96

420

,065

27,39

0—

7,154

5,597

6,017

——

311

—27

1—

2,218

——

—33

,275

124,5

25

Produ

cts an

d serv

ices t

ransfe

rred o

ver tim

e—

——

——

——

421

1,140

1,481

2,679

191

6,025

703,2

9252

090

52,6

8314

,041

Total

4,813

83,96

420

,065

27,39

0—

7,154

5,597

6,017

421

1,140

1,792

2,679

462

6,025

2,288

3,292

520

905

35,95

813

8,566


121


9. OTHER GAINS AND LOSSES

2020 2019

HK$’000 HK$’000


Interest income on:

— Bank deposits 145 46

— Deposits received from suppliers — 471

Total interest income for financial assets that are not at fair value

through profit or loss 145 517

Dividend income from equity investments 71 1,405

Gain on derecognition of lease liabilities 24 —

Sundry income 323 837

563 2,759

10. FINANCE COSTS

2020 2019

HK$’000 HK$’000


Interests on bonds payables 4,689 4,000

Interest expenses on lease liabilities (note 19) 239 361

Imputed interest expenses on redeemable convertible

preference shares 14 10

Others — 1

4,942 4,372


122


11. INCOME TAX CREDIT

2020 2019

HK$’000 HK$’000

Current tax — Hong Kong

Provision for the year — —

Over-provision for prior years — 36

Current tax — Overseas

Provision for the year — (38)

Under-provision for prior years (102) (37)

(102) (39)

Deferred tax (note 36) 5,540 14,469

5,438 14,430

Under the two-tiered Profits Tax regime, the first HK$2 million of profits of the qualifying group entity

established in Hong Kong will be taxed at 8.25%, and profits above that amount will be subject to the tax

rate of 16.5%. The profits of the group entities not qualifying for the two-tiered Profit Tax rate regime will

continue to be taxed at a rate of 16.5%.

PRC enterprise income tax has been provided at a rate of 25%.

Tax charge on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries

in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.


123


11. INCOME TAX CREDIT (Continued)The reconciliation between the income tax credit and the product of loss before tax multiplied by the Hong

Kong Profits Tax rate is as follows:

2020 2019

HK$’000 HK$’000

Loss before tax (69,705) (339,491)

Tax at the domestic income tax rate of 16.5% (11,501) (56,016)

Tax effect of income that is not taxable (1,329) (1,707)

Tax effect of expenses that are not deductible 12,409 29,347

Tax effect of tax loss not recognised 2,844 18,323

Tax effect of utilisation of tax losses not previously recognised (86) (723)

Temporary differences not recognised (2,930) 14

Under-provision for prior years 102 37

Effect of different tax rates of subsidiaries operating in other

jurisdiction (4,947) (3,705)

Income tax credit (5,438) (14,430)


124


12. LOSS FOR THE YEARThe Group’s loss for the year is stated after charging/(crediting) the following:

2020 2019

HK$’000 HK$’000

Auditor’s remuneration 2,800 3,000

Cost of inventories sold of coal mining business 16,257 96,349

Depreciation on property, plant and equipment 1,000 3,300

Depreciation on right-of use assets 1,849 2,322

Amortisation of intangible assets (included in administrative and other

operating expenses) 10,190 10,305

Property, plant and equipment written off — 148

(Recovery income from trade and other receivables written off)/

trade and other receivables written off (161) 101,063

Loss on disposal of subsidiaries — 281

Loss on disposal of property, plant and equipment 26 60

(Gain)/loss on disposal of financial assets at FVTPL (1,000) 28,584

Fair value loss on financial assets at FVTPL 18,139 24,456

Fair value gain on financial liabilities at FVTPL (6,347) (2,989)

Impairment loss on trade and other receivables 4,762 114,164

Impairment loss on intangible assets — 23,288

Impairment loss on investment in associates 1,959 —

Impairment loss on goodwill 1,118 —

Net exchange loss/(gain) 14 (48)

13. EMPLOYEE BENEFITS EXPENSES

2020 2019

HK$’000 HK$’000

Employee benefits expense:

— Salaries, bonuses and allowances 23,318 26,343

— Retirement benefit scheme contributions 496 526

23,814 26,869

For the year ended 31 December 2020, COVID-19 related government grants amounted to approximately

HK$1,969,000 have been offset against employee benefits expenses.


125


13. EMPLOYEE BENEFITS EXPENSES (Continued) Five highest paid individuals

The five highest paid individuals in the Group during the year included two (2019: three) directors and chief

executive officers whom emoluments are reflected in the analysis presented in note 14. The emoluments of

the remaining three (2019: two) individuals are set out below:

2020 2019

HK$’000 HK$’000

Basic salaries, bonuses, allowances and benefits in kind 2,740 1,640

Retirement benefits scheme contributions 54 36

2,794 1,676

The emoluments fell within the following bands:

2020 2019

HK$Nil to HK$1,000,000 2 2

HK$1,000,001 to HK$1,500,000 1 —

During the year, no emoluments were paid by the Group to any of the directors or the five highest paid

individuals as an inducement to join or upon joining the Group or as compensation for loss of office (2019:

HK$Nil).


126


14. BENEFITS AND INTERESTS OF DIRECTORS AND SENIOR MANAGEMENT (a) Directors’ and senior management’s emoluments

The remuneration of every directors and senior management is set out below:

Emoluments paid or receivable in respect of a person’s services as a director and chief executive officer, whether of the Company or its

subsidiary undertaking

Fees SalariesDiscretionary

bonus

Employer’s contribution to a

retirement benefit scheme Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000


Executive directors:CHAN Nap Kee, Joseph — 3,000 — 18 3,018YANG Yongcheng — 730 — — 730

Independent non-executive directors:LIEW Swee Yean 151 — — — 151SIU Siu Ling, Robert (retired on

30 December 2020) 151 — — — 151Dr. WONG Yun Kuen 151 — — — 151ANDERSON Brian Ralph 151 — — — 151

Chief Executive Officers:Chen Chun Long — 1,080 90 18 1,188Ching Ho Tung Philips — 600 50 18 668

604 5,410 140 54 6,208


Executive directors:CHAN Nap Kee, Joseph — 3,000 2,000 18 5,018YANG Yongcheng — 742 — — 742

Independent non-executive directors:LIEW Swee Yean 149 — — — 149SIU Siu Ling, Robert 149 — — — 149Dr. WONG Yun Kuen 149 — — — 149ANDERSON Brian Ralph 149 — — — 149

Chief Executive Officers:Chen Chun Long (appointed on

19 June 2019) — 1,144 540 18 1,702Ching Ho Tung Philips (appointed on

19 June 2019) — 620 — 18 638

596 5,506 2,540 54 8,696

Neither the chief executive nor any of the directors waived any emoluments during the year (2019:

HK$Nil).


127


14. BENEFITS AND INTERESTS OF DIRECTORS AND SENIOR MANAGEMENT (Continued)

(b) Directors’ material interests in transactions, arrangements or contractsNo significant transactions, arrangements and contracts in relation to the Group’s business to which the

Company was a party and in which a director of the Company and the director’s connected party had a

material interest, whether directly or indirectly, subsisted at the end of the year or at any time during

the year.

15. DIVIDEND

2020 2019

HK$’000 HK$’000

2018 Final dividend of HK0.17 cents per ordinary share paid — 980

2018 Special dividend of HK0.17 cents per ordinary share — 980

— 1,960

No final dividend for the year ended 31 December 2020 and 2019 has been declared by the Company.

16. DISCONTINUED OPERATIONSOn 6 November 2019, the Group dissolved the wholly owned subsidiary, Better Business International Limited

(“Better Business”). Better Business and its subsidiaries were principally engaged in the coal mining business in

Tajikistan. In view of the political instability and devaluation currency in Tajikistani Somoni, the directors of the

Company decided to shut down the operations in Tajikistan.

As the business operations of production and exploitation of coal in Tajikistan are considered as a separate

major line of business which was previously classified as the production and exploitation of coal business

segment of the Group, it is accounted for as discontinued operations for the year ended 31 December 2019.


128


16. DISCONTINUED OPERATIONS (Continued)Since early 2020, COVID-19 had been widely spread in Tajikistan, the local staff had left Tajikistan due to

safety reasons and the management of the Group had been unable to travel to Tajikistan and obtain the

related books and records in Tajikistan.

2020 2019

HK$’000 HK$’000

Loss for the year from discontinued operations:

Revenue — 923

Cost of goods sold — (1,026)

Gross loss — (103)

Other gains and losses — —

Administrative and other operating expenses — (3,305)

Loss before tax — (3,408)

Income tax expense — —

Loss for the year/period from discontinued operations — (3,408)

Loss for the year/period from discontinued operations attributable to

— Owners of the Company — (3,400)

— Non-controlling interests — (8)

— (3,408)

None of the depreciation and amortisation and auditor’s remuneration were included in loss for the year/

period from discontinued operations.

2020 2019

HK$’000 HK$’000

Cash flows from discontinued operations:

Net cash outflows from operating activities — (2,820)

Net cash inflows from financing activities — 3,281

Net cash inflows — 461


129


17. LOSS PER SHARE From continuing and discontinued operations

The calculation of the basic loss per share is based on the following:

2020 2019

HK$’000 HK$’000

Loss for the purpose of calculating basic loss per share (60,295) (318,130)

2020 2019

Number of shares

Weighted average number of ordinary shares for the purpose of

calculating basic loss per share 576,566,055 576,566,055

From continuing operationsThe calculation of the basic loss per share from continuing operations is based on the following:

2020 2019

HK$’000 HK$’000

Loss for the purpose of calculating basic earnings per share (60,295) (318,130)

Loss for the year from discontinued operations — 3,400

Loss for the purpose of calculating basic loss per share from

continuing operations (60,295) (314,730)

The weighted average numbers of ordinary shares used as denominators in calculating the basic earnings per

share are the same.

From discontinued operationsBasic loss per share from the discontinued operations is HKNil cent per share (2019: HK0.58 cent per share)

based on the loss for the year from discontinued operations attributable to the owners of the Company of

approximately HK$Nil (2019: HK$3,400,000) and the denominators used are the same as those detailed above

for both basic earnings per share.

No diluted earnings per share are presented as the Company did not have any dilutive potential ordinary

sharing during the year ended 31 December 2019 and 2020.


130


18. PROPERTY, PLANT AND EQUIPMENT

Leasehold

land Buildings

Leasehold

improvements

Plant and

Machinery

Office

equipment

Furniture

and fixtures

Motor

vehicles

Construction

in progress Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost

At 1 January 2019 169 6,907 5,792 6,029 967 108 2,239 10,585 32,796

Reclassification due to adoption of IFRS 16 (169) — — — — — — — (169)

Additions — — 1,454 823 151 7 — — 2,435

Disposal — — — — (3) — (158) — (161)

Transfer — — 696 — — — — (696) —

Written off — — (121) (25) (56) (13) — — (215)

Exchange differences — (120) (115) (117) (13) (1) (36) (173) (575)

At 31 December 2019 and 1 January 2020 — 6,787 7,706 6,710 1,046 101 2,045 9,716 34,111

Additions — — — 46 3 — — — 49

Disposal — — — — — — (79) — (79)

Transfer to intangible assets — — — — — — — (9,759) (9,759)

Exchange differences — 419 417 417 44 3 122 43 1,465

At 31 December 2020 — 7,206 8,123 7,173 1,093 104 2,088 — 25,787

Accumulated depreciation and

impairment losses

At 1 January 2019 13 5,713 753 1,137 652 61 194 — 8,523

Reclassification due to adoption of IFRS 16 (13) — — — — — — — (13)

Charges for the year — 126 456 1,784 239 17 678 — 3,300

Disposal — — — — (3) — (85) — (88)

Written off — — (30) (7) (22) (6) — — (65)

Exchange differences — (101) (8) (48) (9) (1) (12) — (179)

At 31 December 2019 and 1 January 2020 — 5,738 1,171 2,866 857 71 775 — 11,478

Charges for the year — 125 500 208 37 16 114 — 1,000

Disposal — — — — — — (30) — (30)

Exchange differences — 361 48 189 35 3 53 — 689

At 31 December 2020 — 6,224 1,719 3,263 929 90 912 — 13,137

Carrying amount

At 31 December 2020 — 982 6,404 3,910 164 14 1,176 — 12,650

At 31 December 2019 — 1,049 6,535 3,844 189 30 1,270 9,716 22,633


131


19. RIGHT-OF-USE ASSETS

Leasehold

lands

Leased

properties Total

HK$’000 HK$’000 HK$’000

At 1 January 2019 13,424 2,497 15,921

Additions — 4,822 4,822

Depreciation (510) (1,812) (2,322)

Derecognition — (564) (564)

Exchange differences (225) (111) (336)

At 31 December 2019 and 1 January 2020 12,689 4,832 17,521

Depreciation (503) (1,346) (1,849)

Derecognition — (904) (904)

Lease modification — (162) (162)

Exchange differences 754 130 884

At 31 December 2020 12,940 2,550 15,490

2020 2019

HK$’000 HK$’000

Depreciation expenses on right-of-use assets 1,849 2,322

Interest expense on lease liabilities (included in finance costs) 239 361

Expenses relating to short-term lease (included in cost of goods sold

and administrative expenses) 873 1,170

Details of total cash outflow for leases is set out in note 42(d).

For both years, the Group leases various offices and factories for its operations. Lease contracts are entered

into for fixed term of 2 to 5 years (2019: 2 to 5 years). Lease terms are negotiated on an individual basis and

contain a wide range of different terms and conditions. In determining the lease term and assessing the

length of the non-cancellable period, the Group applies the definition of a contract and determines the

period for which the contract is enforceable.


132


20. GOODWILL

HK$’000

Cost

At 1 January 2019, 31 December 2019, 1 January 2020 and 31 December 2020 1,118

Accumulated impairment losses

At 1 January 2019, 31 December 2019 and 1 January 2020 —

Impairment loss recognised for the year (1,118)

At 31 December 2020 (1,118)

Carrying amount

At 31 December 2020 —

At 31 December 2019 1,118

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units

(“CGUs”) that are expected to benefit from that business combination. The carrying amount of goodwill

(other than goodwill relating to discontinued operations) had been allocated as follows:

2020 2019

HK$’000 HK$’000

Provision of advertising and public relationship events

Pineapple Media Limited (“Pineapple Media”) — 1,118


133


20. GOODWILL (Continued)The recoverable amounts of the CGUs have been determined on the basis of their value in use using

discounted cash flow method. The key assumptions for the discounted cash flow method are those regarding

the discount rates, growth rates and budgeted gross margin and turnover during the period. The Group

estimates discount rates using pre-tax rates that reflect current market assessments of the time value of

money and the risks specific to the CGUs. The growth rates are based on long-term average economic

growth rate of the geographical area in which the businesses of the CGUs operate. Budgeted gross margin

and turnover are based on past practices and expectations on market development.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the

directors for the next five years with the residual period using the growth rate of 3% (2019: 1%). This rate

does not exceed the average long-term growth rate for the relevant markets.

The rate used to discount the forecast cash flows from the Group’s provision of advertising and public

relationship events are 18% (2019: 22.86%).

At 31 December 2020, before impairment testing, goodwill of approximately HK$1,118,000 was allocated to

Pineapple Media within the consulting and media service business segment. Due to a slow-down in the media

sector with fewer projects in public relationship events, the Group has revised its cash flow forecasts for this

CGU. The CGU has been reduced to its recoverable of HK$Nil and an impairment loss of approximately

HK$1,118,000 recognised on the goodwill.


134


21. INTANGIBLE ASSETS

Mining rights

Exploration and

evaluation

assets Total

HK$’000 HK$’000 HK$’000

Cost

At 1 January 2019 234,614 — 234,614

Written off (63,232) — (63,232)

Exchange differences (5,017) — (5,017)

At 31 December 2019 and 1 January 2020 166,365 — 166,365

Transferred from construction in progress — 9,759 9,759

Additions — 43,251 43,251

Exchange differences 10,265 3,019 13,284

At 31 December 2020 176,630 56,029 232,659

Accumulated amortisation and

impairment losses

At 1 January 2019 84,842 — 84,842

Amortisation for the year 10,305 — 10,305

Impairment loss 23,288 — 23,288

Written off (63,232) — (63,232)


At 31 December 2019 and 1 January 2020 52,266 — 52,266

Amortisation for the year 10,190 — 10,190

Exchange differences 3,805 — 3,805

At 31 December 2020 66,261 — 66,261

Carrying amount

At 31 December 2020 110,369 56,029 166,398

At 31 December 2019 114,099 — 114,099


135


21. INTANGIBLE ASSETS (Continued) Mining rights

At 31 December 2020, the Group’s mining rights represent the rights for production and exploitation of a

coal mine in Xinjiang, PRC. The major content of the coal mine is thermal coal. The mining rights are stated

at cost less accumulated amortisation and impairment losses over the estimated useful lives of mining rights.

For the year ended 31 December 2019, the directors of the Company decided to shut down the operation of

mining business located in Tajikistan and thus to fully write off the mining right of Tajikistan with net

carrying amounts of HK$Nil.

Having regard to the change in production plan to operate the mine at a significantly reduced annual

production capacity, the Group carried out reviews of the recoverable amount of its mining rights for the year

ended 31 December 2019. These assets are used in the Group’s coal mining business segment. The review led

to the recognition of an impairment loss of approximately HK$23,288,000 for mining rights that have been

recognised in profit or loss. The recoverable amount of approximately HK$114,099,000 for the relevant assets

has been determined on the basis of their value in use method using discounted cash flow method. The

discount rate used was 25.30%.

Exploration and evaluation assetsExploration and evaluation assets include the cost of mining and exploration rights and the expenditures

incurred in the search for mineral resources as well as the determination of the technical feasibility and

commercial viability of extracting those resources.

During the year, the Group obtained a mineral exploration license with a mining area of 7.35 km2 located in

Xinjiang, PRC. The exploration license has a legal life of 5 years ending in August 2025. The mining area is

under the exploration and evaluation stage as at 31 December 2020 and the exploration and evaluation assets

is not subject to amortisation until it can be reasonably ascertained that the mining area is capable of

commercial production and the exploration license is transferred to mining right.


136


22. INVESTMENT IN ASSOCIATES

2020 2019

HK$’000 HK$’000

Unlisted investments at cost 1,959 1,959

Less: impairment losses recognised (1,959) —

— 1,959

Details of the Group’s associates at 31 December 2020 are as follows:

Name

Place of

incorporation/

registration

Issued and paid up

capital

Percentage of ownership

interest/voting power/

profit sharing Principal activities

2020 2019

SCH Limited Isle of Man 100,000 ordinary shares

of GBP0.02 each

45.56% 45.56% Investment holding

Sturgeon Capital Limited United Kingdom 249,999 ordinary shares

of GBP0.4 each

50.98% 50.98% Funds management

On 11 November 2019, the Group acquired 45.56% equity interest in SCH Limited (“SCH”) which holds

approximately 90.04% of equity interest in Sturgeon Capital Limited (“Sturgeon Capital”). SCH and Sturgeon

Capital are collectively referred as “SCH Group”.

Sturgeon Capital is an independent investment manager specializing in frontier and emerging markets.

Sturgeon Capital manages the Sturgeon Central Asia fund, a multi-strategy investment fund focused on

Central Asia and the surrounding region. The Sturgeon Capital management team have been investing in the

region since 2005 and is made up of industry professionals with diverse professional background of regional

and industry specific experience. Prior to the acquisition on 11 November 2019, the Group held 9.96% of

equity interest in Sturgeon Capital and recognised the investment as financial assets at FVTOCI. Upon the

completion of the acquisition, the Group held 50.98% of equity interest in Sturgeon Capital, for which

41.02% interest was through SCH and 9.96% interest was directly held by the Group. Consequently,

Sturgeon Capital is classified as an associate of the Group as the Group does not have control over Sturgeon

Capital.


137


22. INVESTMENT IN ASSOCIATES (Continued)Following the completion of the acquisition, a share swap and restructuring involving the Group and SCH

Group will take place pursuant to which the Group will transfer its entire shareholdings in Sturgeon Capital in

exchange for newly issued ordinary shares of SCH. Sturgeon Capital will be wholly-owned by SCH and SCH

will be 50.98% owned by the Group upon the completion of the share swap restructuring arrangement.

Due to the outbreak of COVID-19 since early 2020, the process of the share swap arrangement was delayed.

The offices of SCH Group are located in United Kingdom where COVID-19 has been widely spread and the

chief accountant of SCH Group passed away due to the pandemic. The remaining local staff is unable to

access and obtain the financial information of the SCH Group due to the local lockdown measures and the

death of the chief accountant. As such, the directors of the Company decided to record the carrying amount

of the investment in associates at cost.

During the year ended 31 December 2020, the directors of the Company have negotiation with the

controlling parties of SCH Group for cancellation of share swap and restructuring arrangement. The directors

of the Company confirmed that the negotiation has not finalised up to the date of approval of these

consolidated financial statements. As such, the management of the Group determined to make full

impairment on the investment amount in the associates at the end of the year so as to reflect the potential

risk of loss.

23. FINANCIAL ASSETS AT FVTOCI

2020 2019

HK$’000 HK$’000

Unlisted equity securities

— in the British Virgin Islands 10,900 10,900

10,900 10,900

9% redeemable preference shares 8,200 8,200

19,100 19,100

The carrying amounts of the Group’s financial assets at FVTOCI were denominated in HK$.


138


24. LONG-TERM DEPOSITS

2020 2019

HK$’000 HK$’000

Deposits paid for

— acquisition of a subsidiary (note) 20,000 20,000

Note:

On 20 December 2018, a wholly-owned subsidiary of the Company entered a sales and purchase agreement (the “Agreement”) with an

independent third party to acquire the 100% equity capital of Double Up Group Limited and its subsidiaries at the consideration of

HK$30,000,000. In December 2018, a deposit of HK$20,000,000 was paid to the vendor pursuant to the Agreement. The deposit is non-

interest bearing, unsecured and will form part of the purchase consideration upon the completion of the acquisition. Details of the

acquisition were set out in the Company’s announcements dated 20 December 2018 and 7 January 2019.

In view of certain precedent conditions for completion of the acquisition as set out in the Agreement have not been completed, the directors

of the Company considered the acquisition has not been completed as at 31 December 2019 and 2020 and before the date of approval of

these consolidated financial statements.

25. FINANCIAL ASSETS AT FVTPL

2020 2019

HK$’000 HK$’000

Equity securities, at fair value

Listed in Hong Kong 36,293 52,489

The carrying amounts of the above financial assets are classified as follows:

2020 2019

HK$’000 HK$’000

Held for trading 36,293 52,489

The carrying amounts of the above financial assets are mandatorily measured at fair value through profit or

loss in accordance with IFRS 9.

The investments included above represent investments in listed equity securities that offer the Group the

opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon

rate.

The fair values of listed securities are based on current bid prices.


139


26. INVENTORIES

2020 2019

HK$’000 HK$’000

Raw materials, consumable goods and spare parts 535 1,041

Work in progress 2,136 484

Finished goods 4,325 3,538

6,996 5,063

27. TRADE AND BILLS RECEIVABLES

2020 2019

HK$’000 HK$’000

Trade receivables 72,953 67,966

Allowance for doubtful debts (46,310) (41,351)

26,643 26,615

Bills receivables 641 448

27,284 27,063

The credit terms of trade receivables are in accordance with specific payment schedules agreed with various

customers.

An ageing analysis of trade and bills receivables, based on the invoice date is as follows:

2020 2019

HK$’000 HK$’000

0–30 days 16,376 14,759

31–60 days 2,718 7,489

61–90 days 2,794 292

91 days–1 year 7,578 8,388

Over 1 year 44,128 37,486

73,594 68,414


140


27. TRADE AND BILLS RECEIVABLES (Continued)The carrying amounts of the Group’s trade and bills receivables are denominated in the following currencies:

2020 2019

HK$’000 HK$’000

HK$ 323 960

RMB 26,961 26,103

27,284 27,063

28. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

2020 2019

HK$’000 HK$’000

Trade deposits placed with suppliers — 2,995

Utilities and other deposits 1,116 858

Prepayments 4,397 14,770

Transportation fee receivables — 24

Other receivables 13,562 10,507

19,075 29,154

29. BANK AND CASH BALANCESAs at 31 December 2020, the bank and cash balances of the Group’s subsidiaries in the PRC denominated in

RMB amounted to approximately HK$5,240,000 (2019: HK$3,889,000). Conversion of RMB into foreign

currencies is subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale

and Payment of Foreign Exchange Regulations.


141


30. TRADE PAYABLESAn ageing analysis of trade payables, based on the date of receipt of goods, is as follows:

2020 2019

HK$’000 HK$’000

0–30 days 3,027 2,076

31–60 days 1,180 1,469

61–90 days 135 337

91–180 days 442 103

Over 365 days 528 493

5,312 4,478

The carrying amounts of the Group’s trade payables are denominated in RMB.

31. OTHER PAYABLES AND ACCRUALS

2020 2019

HK$’000 HK$’000

Accruals 11,044 8,518

Other payables 89,791 29,227

Due to a director 29,588 9,683

130,423 47,428

The amount due to a director is unsecured, interest free and repayable on demand.

32. BOND PAYABLESOn 24 August 2018, the Company issued the straight bonds, with the principal amount of HK$50,000,000

(the “Bonds”). The Bonds are unsecured, interest-bearing of 8% per annum and repayable on 23 August

2020.

During the year, a supplementary agreement was entered by the Company and holders of the Bonds in which

the repayment date of the Bonds was extended to 23 August 2021 and the interest rate had been increased

from 8% per annum to 10% per annum.


142


33. OTHER FINANCIAL LIABILITIESOn 18 April 2018 and 28 January 2019, the Group entered into agreements with a third party to forward sell

financial assets at fair value through profit or loss at considerations of approximately HK$30,000,000 (the

“Shares A”) and HK$13,000,000 (the “Shares B”) respectively. The completion dates of the transactions to

take place on dates falling 2 years from the dates of signing the agreements. The Group also granted options

to the third party to sell back the Shares A and the Shares B at prices of HK$3.41 per share and HK$2.80 per

share by amounts of approximately HK$33,000,000 and HK$15,079,000 respectively to the Group on the

completion dates of the transactions.

During the year, the Group entered into an extension agreement with the third party to extend the

completion date of Shares A for two years to 18 April 2022. Other terms and condition as set out in the

agreement of Shares A remain unchanged.

Subsequent to the reporting period, an agreement was entered by the Group with the third party to extend

the completion date of Share B for two years to 27 January 2023. Other terms and conditions as set out in

the agreement of Shares B remain unchanged.

2020 2019

HK$’000 HK$’000

Financial liabilities at FVTPL 36,664 43,011

Analysed as:

2020 2019

HK$’000 HK$’000

Current liabilities 14,713 30,646

Non-current liabilities 21,951 12,365

36,664 43,011


143


34. LEASE LIABILITIES

Minimum

lease payments

Present value of minimum

lease payments

2020 2019 2020 2019

HK$’000 HK$’000 HK$’000 HK$’000

Within one year 1,346 1,979 1,231 1,703

In the second to fifth years, inclusive 1,460 3,350 1,390 3,158

2,806 5,329 2,621 4,861

Less: Future finance charges (185) (468) N/A N/A

Present value of lease obligations 2,621 4,861 2,621 4,861

Less: Amount due for settlement within

12 months (shown under current

liabilities) (1,231) (1,703)

Amount due for settlement after 12 months 1,390 3,158

The weighted average incremental borrowing rates applied to lease liabilities range from 5.28% to 16.34%

(2019: from 5.28% to 13.57%).

The Group’s lease liabilities are denominated in the following currencies:

2020 2019

HK$’000 HK$’000

HK$ 488 1,332

RMB 2,133 3,529

2,621 4,861


144


35. REDEEMABLE CONVERTIBLE PREFERENCE SHARESDuring the year ended 31 December 2019, Allied Global Limited (“Allied Global”), a wholly owned subsidiary

of the Company, issued 6,420 redeemable convertible preference shares which have a par value of US$10 per

share, carried a coupon rate of 3% per annum. The holder is entitled to convert the redeemable convertible

preference shares into 2,496 ordinary shares of Allied Global at any time within two years from 1 May 2019

at a total amount of approximately HK$501,000 (equivalent to US$64,000).

There was no conversion or redemption of redeemable convertible preference shares during the year ended

31 December 2020 and 2019.

The proceeds received from the issue of the redeemable convertible preference shares have been recognised

as liability components as follows:

2020 2019

HK$’000 HK$’000

Nominal value of redeemable convertible preference shares issued and

liability component at date of issue 501 501

Interest charged 24 10

Liability component at 31 December 525 511

Analysed as:

2020 2019

HK$’000 HK$’000

Current liabilities 525 —

Non-current liabilities — 511

525 511

The interest charged for the year is calculated by applying an effective interest rate of 2.91% to the liability

component for the year (2019: 8 months period since the redeemable convertible preference shares were

issued).


145


36. DEFERRED TAXThe following are the deferred tax assets/(liabilities) recognised by the Group.

Fair value

adjustment of

mining rights

Financial assets

at fair value

through profit

or loss Total

HK$’000 HK$’000 HK$’000

At 1 January 2019 (35,931) (2,891) (38,822)

Credit to profit or loss for the year (note 11) 8,398 6,071 14,469

Exchange differences 495 — 495

At 31 December 2019 and 1 January 2020 (27,038) 3,180 (23,858)

Credit to profit or loss for the year (note 11) 2,547 2,993 5,540


At 31 December 2020 (26,013) 6,173 (19,840)

At the end of the reporting period the Group has unused tax losses of approximately HK$161,844,000 (2019:

HK$128,481,000) available for offset against future profits. No deferred tax asset has been recognised in

respect of the approximately HK$161,844,000 (2019: HK$128,481,000) due to the unpredictability of future

profit streams. Included in unrecognised tax losses are losses of approximately HK$1,573,000, HK$3,090,000,

HK$4,716,000, HK$15,306,000 and HK$5,526,000 that will expire in 2021, 2022, 2023, 2024 and 2025

(2019: HK$543,000, HK$1,482,000, HK$2,910,000, HK$4,442,000 and HK$14,417,000 that will expire in

2020, 2021, 2022, 2023 and 2024) respectively. Remaining tax losses may be carried forward indefinitely.


146


37. SHARE CAPITAL

2020 2019

HK$’000 HK$’000

Authorised:

5,000,000,000 Ordinary shares of HK$0.1 each 500,000 500,000

Issued and fully paid:

576,566,055 Ordinary shares of HK$0.1 each 57,657 57,657

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going

concern and to maximise the return to the shareholders through the optimisation of the debt and equity

balance.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and

makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the

underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the payment of

dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce

debts.

The Group monitors capital on the basis of the shareholders equity ratio. This ratio is calculated as total share

equity divided by total asset. Total share equity comprises share capital, retained profits and other reserves.

The only externally imposed capital requirement for the Group is in order to maintain its listing on the Stock

Exchange it has to have a public float of at least 25% of the shares.

The Group receives a report from the share registrars monthly on substantial share interests showing the non-

public float and it demonstrates continuing compliance with the 25% limit throughout the year. As at 31

December 2020, 56.8% (2019: 56.8%) of the shares were in public hands.


147


38. STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY

(a) Statement of financial position of the Company

2020 2019Note HK$’000 HK$’000

Non-current assetsInvestments in subsidiaries 1,000 1,000Deferred tax assets 6,173 3,180

7,173 4,180

Current assetsFinancial assets at FVTPL 36,293 52,489Deposits, prepayments and other receivables 797 1,166Amounts due from subsidiaries 3,838 89,791Bank and cash balances 14,393 15,299

55,321 158,745

Current liabilitiesOther payables and accruals 14,002 7,191Amounts due to subsidiaries 8,231 9,380Amount due to a director 25,993 9,180Bonds payables 50,000 50,000Other financial liabilities 14,713 30,646

112,939 106,397

Net current (liabilities)/asset (57,618) 52,348

Total assets less current liabilities (50,445) 56,528

Non-current liabilitiesOther financial liabilities 21,951 12,365

21,951 12,365

NET (LIABILITIES)/ASSETS (72,396) 44,163

CAPITAL AND RESERVESShare capital 57,657 57,657Reserves 38(b) (130,053) (13,494)

(CAPITAL DEFICIENCY)/TOTAL EQUITY (72,396) 44,163

Approved by the Board of Directors on 22 March 2021 and are signed on its behalf by:

CHAN Nap Kee, Joseph YANG Yongcheng


148


38. STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (Continued)

(b) Reserve movement of the Company

Share premium

Shares held under share

award scheme Accumulated

losses Total(note 39(b)(i)) (note 40)HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2019 1,363,055 (395) (1,263,928) 98,732

Loss for the year — — (107,290) (107,290)Purchase of shares held under the

share award scheme — (2,976) — (2,976)Dividend paid (1,960) — — (1,960)

At 31 December 2019 and 1 January 2020 1,361,095 (3,371) (1,371,218) (13,494)

Loss for the year — — (116,559) (116,559)

At 31 December 2020 1,361,095 (3,371) (1,487,777) (130,053)

39. RESERVES (a) Group

The amounts of the Group’s reserves and movements therein are presented in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of changes in equity.

(b) Nature and purpose of reserves (i) Share premium

Under the Companies Law of the Cayman Islands, the funds in the share premium of the Company are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.

(ii) Foreign currency translation reserveThe foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in note 4(d) to the consolidated financial statements.

(iii) Financial assets at FVTOCI reserveThe financial assets at FVTOCI reserve comprises the cumulative net change in the fair value of financial assets at FVTOCI held at the end of the reporting period and is dealt with in accordance with the accounting policy in note 4(j) to the consolidated financial statements.


149


40. SHARE-BASED PAYMENTS Share award scheme adopted on 14 June 2016

On 14 June 2016, the Company adopted a share award scheme (the “New Share Award Scheme”) under which shares of the Company (the “New Awarded Shares”) may be awarded to selected employees (including without limitation any directors) of any members of the Group (the “New Selected Employees”) pursuant to the terms of the scheme rules and trust deed of the New Share Award Scheme. The purpose of the New Share Award Scheme are (i) to recognise the contributions by certain employees of any members of the Group and to provide them with incentives in order to retain them for the continual operation and development of the Group; and (ii) to attract suitable personnel for further development of the Group. The New Share Award Scheme became effective on the adoption date and, unless otherwise terminated or amended, shall be valid and effective for a term of 5 years commencing from the date of the New Share Award Scheme.

The New Share Award Scheme shall be subject to the administration of the board of directors of the Company and the trustee of the New Share Award Scheme (the “New Trustee”) in accordance with the rules of the New Share Award Scheme and the trust deed entered into between the Company and the New Trustee (the “New Trust Deed”). The decision of the board of directors of the Company with respect to any matter arising under the New Share Award Scheme (including the interpretation of any provision) shall be final and binding. The board of the directors of the Company may from time to time cause to be paid cash or made available to the trust constituted by the New Trust Deed (the “New Trust”) by way of settlement or otherwise contributed by the Company or any subsidiary of the Company as directed by the board of directors of the Company which constitute part of the funds and properties held under the New Trust and managed by the New Trustee for the benefit of the employees of the Group (other than the employee who is resident in a place where the award of the New Awarded Shares and/or the vesting and transfer of the New Awarded Shares pursuant to the terms of the New Share Award Scheme is not permitted under the laws or regulations of such place or where in view of the board of directors of the Company or the New Trustee (as the case may be), compliance with applicable laws or regulations in such place makes it necessary or expedient to exclude such employees of the Group (the “Excluded Employee”) (the “Trust Fund”), for the purchase or subscription (as the case may be) of the shares of the Company and other purposes set out in the rules relating the New Share Award Scheme and the New Trust Deed.

The board of directors of the Company may, from time to time, at its absolute discretion select any employee of the Group (other than any Excluded Employee) for participation in the New Share Award Scheme as a New Selected Employee, and grant such number of New Awarded Shares to any New Selected Employee at no consideration and in such number and on and subject to such terms and conditions as it may in its absolute discretion determine.

Where the New Awarded Shares is proposed to be made to any New Selected Employee who is a director of the Company (including an independent non-executive director of the Company), such grant must first be approved by all members of the remuneration committee of the Company, or in the case where the grant is proposed to be made to any member of the remuneration committee of the Company, or in case where the grant is proposed to be made to any member of the remuneration committee, by all other members of the remuneration committee of the Company.

Upon the New Awarded Shares grant to any New Selected Employee, a notice will be sent to such New Selected Employee (the “New Grant Notice”) with a copy thereof to the New Trustee, setting out the number of the New Awarded Shares so granted and the conditions (if any) upon which such New Awarded Shares were granted. The number of New Awarded Shares specified in the New Grant Notice shall, subject to acceptance by the relevant New Selected Employee constitute the definitive number of New Awarded Shares being granted to him. Upon receipt the New Grant Notice, the New Selected Employee shall confirm acceptance of the New Awarded Shares being granted to him by signing and returning the acceptance form attached to the New Grant Notice, together with the certified copies of the identity verification documents of the New Selected Employees, within 10 business days after the date of the New Grant Notice (the “New

Acceptance Period”).


150


40. SHARE-BASED PAYMENTS (Continued) Share award scheme adopted on 14 June 2016 (Continued)

The New Awarded Shares shall only be vested on the New Selected Employee at the end of the vesting

period (if any) and on the proposed date on which the New Awarded Shares are transferred by the Trustee to

the New Selected Employee (the “New Vesting Date”). Subject to the terms and conditions of the New Share

Award Scheme, including the fulfillment of all vesting conditions to the vesting of the New Awarded Shares

on such New Selected Employee as specified in the New Grant Notice (if any) and the receipt of the

acceptance form attached to the New Grant Notice and the certified copies of the identity verification

documents of the New Selected Employee before the expiry of the New Acceptance Period and not later than

15 business days before the proposed New Vesting Date, the Company shall procure the New Trustee to

cause the New Awarded Shares to be transferred to and such rights on the New Awarded Shares be vested in

such New Selected Employee on the New Vesting Date. The New Selected Employee shall not have any

interest or rights (including the right receive dividends) in the New Awarded Shares prior the New Vesting

Date.

No further award of New Awarded Shares will make which will result in the aggregate nominal value of the

shares awarded under the New Share Award Scheme exceeding 10% of the issued share capital of the

Company from time to time. The maximum aggregate nominal value of New Awarded Shares which may be

awarded to a New Selected Employee under the New Share Award Scheme shall not exceed 1% of the issued

share capital of the Company from time to time.

No new awarded shares (2019: Nil) was awarded during the year ended 31 December 2020.

2020 2019Number of

shares AmountNumber of

shares Amount’000 HK$’000 ’000 HK$’000

At 1 January 13,610 3,371 1,170 395Purchase during the year — — 12,440 2,976

At 31 December 13,610 3,371 13,610 3,371


151


41. SUBSIDIARIESParticulars of subsidiaries as at 31 December 2020 are as follows:

Name

Place of incorporation/

registration and

operation/form of legal

entity

Issued and paid up

capital/chartered fund

Attributable

equity interest Principal activities

Directly held

Kaisun Energy Group Limited British Virgin Islands,

limited liability

company

US$1 Ordinary 100% Investment holding

Kaisun Collateral Limited British Virgin Islands,

limited liability

company

US$10,000 Ordinary 100% Investment holding

Kaisun Business Solutions Limited British Virgin Islands,

limited liability

company


Kaisun Energy Management Limited British Virgin Islands,

limited liability

company


KEG Corporate Services Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 100% Provision of corporate

services

Allied Global Limited British Virgin Islands,

limited liability

company


West Channel Investments Limited British Virgin Islands,

limited liability

company


Asia Coast International Limited British Virgin Islands,

limited liability

company


Gold Victoria Investments Limited British Virgin Islands,

limited liability

company



152


41. SUBSIDIARIES (Continued)

Name


registration and


entity

Issued and paid up


Attributable


Indirectly held

Kaisun Business Solution (HK) Limited Hong Kong, limited

liability company

HK$100 Ordinary 100% Provision of consulting

services

Kaisun Energy Managers Limited British Virgin Islands,

limited liability

company


Kaisun Energy Corporation Anguilla, limited liability

company


First Concept Development Limited British Virgin Islands,

limited liability

company


World Dynasty Holdings Limited British Virgin Islands,

limited liability

company


Pineapple Media Limited British Virgin Islands,

limited liability

company

625,650 Ordinary shares

of US$1 each

92,304 Ordinary shares

of US$2.08 each

100%

(2019: 70%)

Investment holding

Anway Enterprises Limited British Virgin Islands,

limited liability

company


Goodstar Development Limited British Virgin Islands,

limited liability

company


Wealth Platinum Limited British Virgin Islands,

limited liability

company


Kaisun Esports Limited British Virgin Islands,

limited liability

company



153



Name


registration and


entity

Issued and paid up


Attributable


Indirectly held (Continued)

Kaisun Energy Managers

(Cayman Islands) Limited

Cayman Islands, limited

liability company

US$1 Ordinary 100% Not yet commenced

business

新疆凱運國際貿易有限公司 PRC, limited liability

company

Paid up capital

RMB10,000,000

100% Provision of supply chain

management services

深圳凱順鴻欣貿易有限公司 PRC, limited liability

company

Paid up capital

RMB500,000

100% Provision of supply chain

management services

滕州凱源實業有限公司 PRC, limited liability

company

Registered capital

HK$100,000,000

(2019: HK$60,000,000)

89.20%

(2019: 84.19%)

Manufacturing of coal

mining related

equipment

Paid up capital

HK$30,000,000

山東凱萊能源物流有限公司 PRC, limited liability

company

Registered capital

HK$200,000,000

79.75%

(2019: 79.28%)

Provision of supply chain

management services

Paid up capital

HK$115,878,530

(2019: HK$113,297,010)

新疆吐魯番星亮礦業有限公司 PRC, limited liability

company

Registered capital

RMB50,000,000

Paid up capital

RMB13,650,000

79.75%

(2019: 79.28%)

Production and

exploitation of coal

and coal processing

VOV Studio Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 100% Provision of public

relationship services

People’s Communication & Consultant

Company Limited

Hong Kong, limited

liability company

HK$2,862,010 Ordinary 100%

(2019: 70%)

Advertising & public

relationship event

Evoloop Limited Hong Kong, limited

liability company

HK$10,008,941 Ordinary 59.57% E-Sport

Girlgamer Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 59.57% E-Sport

Kaisun Energy Logistic Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 100% Investment holding


154



Name


registration and


entity

Issued and paid up


Attributable


Indirectly held (Continued)

Kaisun Energy Equipment Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 100% Investment holding

Kaisun Silk Road Limited Hong Kong, limited

liability company

HK$1 Ordinary 100% Financial lease & general

trading

Kaisun Energy Trading Limited Hong Kong, limited

liability company

HK$10,000 Ordinary 100% Provision of supply chain

management

Kaisun Trust & Trustee Services

Company Limited

Hong Kong, limited

liability company

HK$3,000,000 Ordinary 100% Provision of trust and

trustee services

Kaisun Consulting Limited Hong Kong, limited

liability company

HK$3,000,000 Ordinary 100% Provision of consulting

services

Kaisun Trust and Corporate Services

Limited

Hong Kong, limited

liability company

HK$3,000,000 Ordinary 100% Provision of trust and

trustee services

Kaisun Business Solutions (Singapore)

Pte. Limited

Republic of Singapore,

limited liability

company

Paid up capital S$10,000 100% Not yet commenced

business

Girlgamer (Singapore) Pte. Limited Republic of Singapore,

limited liability

company

Paid up capital S$10,000 100% Not yet commenced

business

Zodiac Capital Cayman Limited Cayman Islands, limited

liability company

US$1 Ordinary 100% Not yet commenced

business


155


41. SUBSIDIARIES (Continued)The following table shows information of subsidiary that have non-controlling interests (“NCI”) material to the

Group. The summarised financial information represents amounts before inter-company eliminations.

山東凱萊能源物流有限公司2020 2019

Principal place of business/country of incorporation PRC

% of ownership interests/voting rights held by NCI 20.25% 20.72%

HK$’000 HK$’000

At 31 December:

Non-current assets 206,191 160,662

Current assets 60,343 50,342

Non-current liabilities (26,013) (27,038)

Current liabilities (106,592) (51,333)

Net assets 133,929 132,633

Accumulated NCI (27,120) (33,392)

Year ended 31 December:

Revenue 10,410 28,884

Loss for the year (13,554) (40,437)

Total comprehensive income (7,361) (39,909)

Loss allocated to NCI (2,745) (8,379)

Dividends paid to NCI — —

Net cash generated from/(used in) operating activities 38,229 (5,052)

Net cash used in investing activities (38,967) (4,241)

Net cash generated from financing activities 2,582 8,000

Effect on foreign exchange rate changes 328 1,461

Net increase in cash and cash equivalents 2,172 168

As at 31 December 2020, the bank and cash balances of the Group’s subsidiaries in the PRC denominated in

RMB amounted to approximately HK$5,240,000 (2019: HK$3,889,000). Conversion of RMB into foreign

currencies is subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale

and Payment of Foreign Exchange Regulations.


156


42. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (a) Purchase of non-controlling interests

During the year, the Group acquired the remaining 30% equity interest in Pineapple Media Limited and

its subsidiary, and the remaining 6% equity interest in 滕州凱源實業有限公司 at cash consideration of

HK$8 (equivalent to US$1) and approximately HK$1,710,000 (equivalent to RMB1,440,000) respectively.

The effect of the acquisition on the equity attributable to the owners of the Company is as follows:

HK$’000

Carrying amount of non-controlling interest acquired 1,837

Consideration paid for non-controlling interests (1,710)

Loss on acquisition recognised directly in equity 127

The consideration has not yet been settled by the Group as at 31 December 2020 and has been

included in other payables and accruals as disclosed in note 31 to the consolidated financial statements.


157


42. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) (b) Disposal of subsidiaries

In 2019, the Group disposed of its 90.1% and 100% equity interest in Connect-Me Technologies

Limited (“Connect-Me”) and Kaisun Silk Road (South Asia) Limited and its subsidiaries (“KSR Group”) at

the consideration of HK$1 and HK$8 (equivalent of US$1) to independent third parties respectively.

Connect-Me was principally engaged in trading of electronic products whereas KSR Group was

principally engaged in project investment.

Net assets of Connect-Me and KSR Group at the date of disposal were as follows:

Connect-Me KSR Group Total

HK$’000 HK$’000 HK$’000

Trade receivables 6,952 — 6,952

Deposits, prepayments and other receivables 203 2,454 2,657

Inventory 1,178 — 1,178

Bank and cash balances — 2 2

Bank overdraft (11) — (11)

Trade and other payables (8,168) — (8,168)

Net assets disposed of: 154 2,456 2,610

Non-controlling interests — (2,329) (2,329)

Loss on disposal of a subsidiary (154) (127) (281)

Total consideration — satisfied by cash —* —* —*

Net cash inflow arising on disposal:

Cash consideration received —* —* —*

Cash and cash equivalents disposed of 11 (2) 9

11 (2) 9

* Represents the amount less than HK$1,000


158


42. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) (c) Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both

cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows

were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as

cash flows from financing activities.

1 January 2020

Lease modification

Termination of lease Cash flows

Interest expenses

Exchange difference

Fair value gain

31 December 2020

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Lease liabilities 4,862 (162) (928) (1,521) 239 131 — 2,621Bonds payables 50,000 — — — — — — 50,000Redeemable convertible preference

share 511 — — — 14 — — 525Other financial liabilities 43,011 — — — — — (6,347) 36,664

98,384 (162) (928) (1,521) 253 131 (6,347) 89,810

1 January 2019

Impact on initial

application of IFRS 16

Restated balance at 1 January

2020

Recognition of lease

liabilitiesTermination

of lease Cash flowsInterest

expensesExchange difference

Fair value gain

31 December 2019

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Lease liabilities — 2,497 2,497 4,748 (585) (2,049) 361 (110) — 4,862Bonds payables 50,000 — — — — (4,001) 4,001 — — 50,000Redeemable convertible preference share — — — — — 501 10 — — 511Other financial liabilities 33,000 — — — — 13,000 — — (2,989) 43,011

83,000 2,497 2,497 4,748 (585) 7,451 4,372 (110) (2,989) 98,384


159


42. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) (d) Total cash outflow for leases

Amounts included in the cash flow statements for leases comprise the following:

2020 2019

HK$’000 HK$’000

Within operating cash flows 239 361

Within financing cash flows 1,282 1,688

1,521 2,049

These amounts relate to the following:

2020 2019

HK$’000 HK$’000

Lease rental paid 1,521 2,049

(e) Major non-cash transactionAdditions to intangible assets during the year of approximately HK$4,163,000 were transferred from

deposits, prepayments and other receivables.

43. CONTINGENT LIABILITIESAt 31 December 2020, the Group did not have any significant contingent liabilities (2019: Nil).

44. COMMITMENTSCapital commitments contracted for at the end of the reporting period but not yet incurred are as follows:

2020 2019

HK$’000 HK$’000

Capital contribution to a subsidiary 10,000 10,000

Capital expenditures to property, plant and equipment — 1,319

Capital expenditures to exploration and evaluation assets 7,587 —

17,587 11,319


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45. OPERATING LEASE ARRANGEMENTS The Group as lessee

The Group regularly entered into short-term leases for motor vehicles, staff quarter and office premises. As at

31 December 2020, the portfolio of short-term leases is similar to the portfolio of short-term leases to which

the short-term lease expense disclosed in note 19.

46. SEGMENT INFORMATIONIFRS 8 requires segmental disclosure to be based on the way that the Group’s chief operating decision maker

regards and manages the Group, with the amounts reported for each reportable segment being the measures

reported to the Group’s chief operating decision maker for the purpose of assessing segmental performance

and making decisions about operating matters.

For the year ended 31 December 2019, the Group has seven reportable segments which are production and

exploitation of coal in Xinjiang, provision of supply chain management services for mineral business (including

logistic services), trading securities, mining and metallurgical machineries production in Shandong, organising

eSports event, corporate services business and media services.

During the year, the management of the Group has revisited the segment reporting information and

rearranged the segments reporting structure to align with the internal financial information reported to the

chief operating decision maker for making strategic decisions about resources allocation. The Group’s

reportable segments were rearranged as follows:

— The Group’s three reportable segments previously namely (i) production and exploitation of coal in Xinjiang;

(ii) provision of supply chain management services for mineral business (including logistic services) and

(iii) mining and metallurgical machineries production in Shandong were aggregated into a single

reportable segment — “coal mining business segment”;

— The Group’s three reportable segments previously namely (i) organising eSports event; (ii) corporate services

business; and (iii) media services were aggregated into a single reportable segment — “consulting and

media service business segment”; and

— The Group’s reportable segments of trading securities business and other operating segment which does

not meet any of the quantitative thresholds for determining reportable segments were aggregated into

a single reportable segment — “corporate and investment business segment”.

The comparative amounts of the segment information in 2019 has been reclassified to reflect such change.

The Group’s reportable segments are strategic business units that offer different products and services. They

are managed separately because each business requires different technology and marketing strategies.

The accounting policies of the operating segments are the same as those described in note 4 to the



161


46. SEGMENT INFORMATION (Continued) Information about operating segment profit or loss, assets and liabilities:

Coal mining

business

segment

Consulting

and media

service

business

segment

Corporate

and

investment

business

segment Total

HK$’000 HK$’000 HK$’000 HK$’000

Year ended 31 December 2020

Revenue from external customers 30,475 5,046 437 35,958

Segment loss (27,039) (3,404) (33,824) (64,267)

Interest revenue 145 — — 145

Interest expenses 119 15 4,808 4,942

Depreciation and amortisation 12,328 — 711 13,039

Income tax credit 2,445 — 2,993 5,438

Other material items of income and

expense:

Staff costs 9,240 3,730 10,844 23,814

Other material non-cash items:

Impairment loss on/(reversal of

impairment loss on) trade and

other receivables 3,962 (7) 807 4,762

Impairment loss on goodwill — 1,118 — 1,118

Impairment loss on investment in

associates — — 1,959 1,959

Additions to segment non-current assets 43,300 — — 43,300

As at 31 December 2020

Segment assets 271,473 3,686 78,617 353,776

Segment liabilities 113,783 2,162 134,697 250,642

Investment in associates — — — —


162


46. SEGMENT INFORMATION (Continued) Information about operating segment profit or loss, assets and liabilities: (Continued)

Coal mining

business

segment

Consulting and

media service

business

segment

Corporate and

investment

business

segment Total

HK$’000 HK$’000 HK$’000 HK$’000

(Re-presented) (Re-presented) (Re-presented) (Re-presented)

Year ended 31 December 2019

Revenue from external customers 119,779 11,361 7,426 138,566

Segment loss (207,548) (3,030) (114,483) (325,061)

Interest revenue 27 3 487 517

Interest expenses 166 10 4,196 4,372

Depreciation and amortisation 14,946 9 972 15,927

Income tax credit 8,323 36 6,071 14,430

Other material non-cash items:

Staff costs 12,452 3,278 11,139 26,869

Impairment loss on trade and other

receivables 75,534 24 38,606 114,164

Impairment loss on intangible assets 23,288 — — 23,288

Additions to segment non-current assets 5,692 — 1,565 7,257

As at 31 December 2019

Segment assets 237,182 5,857 95,874 338,913

Segment liabilities 57,358 1,973 117,330 176,661

Investment in associates — — 1,959 1,959


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46. SEGMENT INFORMATION (Continued) Reconciliations of segment assets and liabilities:

2020 2019

HK$’000 HK$’000

(Re-presented)

Assets

Total assets of reportable segments 353,776 338,913

Investment in associates — 1,959

Assets relating to discontinued operations 14 14

Consolidated total assets 353,790 340,886

Liabilities

Total liabilities of reportable segments 250,642 176,661

Liabilities relating to discontinued operations 5,048 5,048

Consolidated total liabilities 255,690 181,709

Geographical information:The Group’s information about its non-current assets (excluding financial assets at FVTOCI and deferred tax

assets) by location of assets are detailed below:

Non-current assets

2020 2019

HK$’000 HK$’000

Hong Kong 20,511 24,622

PRC except Hong Kong 194,027 152,708

Consolidated total 214,538 177,330


164


46. SEGMENT INFORMATION (Continued) Revenue from major customers:

2020 2019

HK$’000 HK$’000


Customer a (note i) N/A 36,497

Customer b (note i) N/A 14,575

Customer c (note i) N/A 15,150

Customer d (note ii) 5,778 N/A

Customer e (note ii) 3,938 N/A

Customer f (note ii) 3,686 N/A

(i) Customer a, b and c did not contribute over 10% of the total revenue of the Group for the year ended

31 December 2020.

(ii) Customers d, e and f did not contribute over 10% of the total revenue of the Group for the year ended

31 December 2019.

47. EVENTS AFTER THE REPORTING PERIODThe outbreak of the COVID-19 pandemic is impacting global economic markets. The Directors continue to

monitor the situation closely and have considered the impact of COVID-19 on the Group’s business and

financial performance. However, the situation is continually evolving and the consequences are therefore

inevitably uncertain.

48. COMPARATIVE FIGURESCertain comparative figures have been reclassified to conform to the current year’s presentation. The new

classification was considered to provide more appropriate presentation of the state of affairs of the Group.

kaisun holdings limited

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